Question

Income Statement

Pietro Frozen Foods, Inc., produces frozen pizzas. For next year, Pietro predicts that 50,900 units will be produced, with the following total costs:

Direct materials	?
Direct labor	55,000
Variable overhead	22,000
Fixed overhead	215,000

Next year, Pietro expects to purchase $117,000 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	$14,900
Ending	$6,900	$16,900

Next year, Pietro expects to produce 50,900 units and sell 50,200 units at a price of $12.00 each. Beginning inventory of finished goods is $44,500, and ending inventory of finished goods is expected to be $36,000. Total selling expense is projected at $20,000, and total administrative expense is projected at $108,000.

Required:

Hide 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 66.99 percent? Management's reaction might be:

- Select your answer -Further analyze sales reportsGrant bonuses to production personnelTrim administrative staffInvestigate production cost managementCorrect 1 of Item 2

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.

Answer 7000 117000 124000 6900 Firstly we have to calculate the cost of goods sold Pietro Frozen Food Inc. Statement of cost of goods sold For coming Year Direct Material Beginning inventory Purchases Material Available Less ending inventory Direct Material Used in Production Direct Labour Manufacturing overheads (215000+22000) Total manufacturing cost added Beginning work in process Less ending work in process Cost of goods manufactured Beginning Finished inventory Ending Finished inventory Cost of goods sold 117100 55000 237000 409100 14900 16900 407100 44500 36000 415600

E 6 Final answer 7 Pietro Frozen Food Inc. 8 Income Statement 9 For coming Year 0 Sales Revenue (50200*12) 1 Cost of goods sold 2 Gross Margin 3 Less Operating expenses 4 Selling expense 5 Adminstartive expenses 6 Net Income 602400 415600 186800 1001 68.99 31.01 20000 108000 128000 58800 21.25 9.76 9 Part 2) 0 The correct answer is 1 Investigate production cost management 3 Explanation as cost of goods sold has increased, so management will look why the cost of goods sold has increased as compared to previous year, so they will look into production cost management