Question

Income Statement

Pietro Frozen Foods, Inc., produces frozen pizzas. For next year, Pietro predicts that 54,900 units will be produced, with the following total costs:

Direct materials	?
Direct labor	62,000
Variable overhead	22,000
Fixed overhead	240,000

Next year, Pietro expects to purchase $126,500 of direct materials. Projected beginning and ending inventories for direct materials and work in process are as follows:

	Direct materials Inventory	Work-in-Process Inventory
Beginning	$7,000	$13,500
Ending	$6,900	$15,500

Next year, Pietro expects to produce 54,900 units and sell 54,200 units at a price of $18.00 each. Beginning inventory of finished goods is $38,500, and ending inventory of finished goods is expected to be $30,000. Total selling expense is projected at $26,500, and total administrative expense is projected at $114,000.

Required:

1. Prepare an income statement in good form. Round the percent to four decimal places before converting to a percentage. For example, .88349 would be rounded to .8835 and entered as 88.35.

Pietro Frozen Foods, Inc.
Income Statement
For the Coming Year
			Percent
		$	%
			%
		$	%
Less operating expenses:
	$
			%
		$	%

2. What if the cost of goods sold percentage for the past few years was 44.85 percent? Management's reaction might be:

Answer 1