Question

Income Statement

Pietro Frozen Foods, Inc., produces frozen pizzas. For next year, Pietro predicts that 53,100 units will be produced, with the following total costs:

Direct materials	?
Direct labor	55,000
Variable overhead	28,000
Fixed overhead	245,000

Next year, Pietro expects to purchase $119,500 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	$6,000	$12,500
Ending	$5,900	$14,500

Next year, Pietro expects to produce 53,100 units and sell 52,400 units at a price of $15.00 each. Beginning inventory of finished goods is $39,500, and ending inventory of finished goods is expected to be $31,000. Total selling expense is projected at $27,500, and total administrative expense is projected at $126,000.

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
Administrative expenses Cost of goods sold Gross margin Sales Selling expenses		$	%
Administrative expenses Cost of goods sold Gross margin Operating income Selling expenses			%
Administrative expenses Cost of goods sold Gross margin Operating income Selling expenses		$	%
Less operating expenses:
Cost of goods sold Gross margin Operating income Sales Selling expenses	$
Administrative expenses Cost of goods sold Gross margin Operating income Sales			%
Operating income Operating loss		$	%

2. What if the cost of goods sold percentage for the past few years was 54.77 percent? Management's reaction might be:

Answer 1