Question

Cost of Goods Sold

Pietro Frozen Foods, Inc., produces frozen pizzas. For next year, Pietro predicts that 54,200 units will be produced, with the following total costs:

Direct materials	?
Direct labor	71,000
Variable overhead	24,000
Fixed overhead	245,000

Next year, Pietro expects to purchase $116,000 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	$11,900
Ending	$6,900	$13,900

Pietro expects to produce 54,200 units and sell 53,500 units. Beginning inventory of finished goods is $39,500, and ending inventory of finished goods is expected to be $31,000.

Required:

1. Prepare a statement of cost of goods sold in good form.

Pietro Frozen Foods, Inc.
Statement of Cost of Goods Sold
For the Coming Year
Cost of goods available for sale Cost of goods manufactured Cost of goods sold Ending finished goods	$
Add: Beginning finished goods Add: Cost of goods available for sale Add: Cost of goods sold Add: Ending finished goods
Cost of goods available for sale Cost of goods manufactured Cost of goods sold Ending finished goods	$
Less: Beginning finished goods Less: Cost of goods manufactured Less: Cost of goods sold Less: Ending finished goods
Beginning finished goods Cost of goods manufactured Cost of goods sold Ending finished goods	$

2. What if the beginning inventory of finished goods decreased by $3,000? What would be the effect on the cost of goods sold?

• increase
• decrease
• no change

by $

Answer 1

1
Pietro Frozen Foods, Inc.
Statement of Cost of Goods Sold
For the Coming Year
Cost of goods manufactured	454100
Add: Beginning finished goods	39500
Cost of goods available for sale	493600
Less: Ending finished goods	31000
Cost of goods sold	462600
2
Cost of goods sold will decrease by $3000
Workings:
Statement of Cost of Goods Manufactured
For the Coming Year
Direct materials
Beginning inventory	7000
Add: Purchases	116000
Materials available	123000
Less: Ending inventory	6900
Direct materials used in production		116100
Direct labor		71000
Manufacturing (Factory) overhead		269000
Total manufacturing costs added		456100
Add: Beginning work in process		11900
Less: Ending work in process		13900
Cost of goods manufactured		454100