Question

Cost of Goods Sold Pietro Frozen Foods, Inc., produces frozen pizzas. For next year, Pietro predicts that 52,500 units will be produced, with the following total costs: Direct materials? Direct labor 66,000 Variable overhead 18,000 Fixed overhead 245,000 Next year, Pietro expects to purchase $125,500 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 $13,900 Ending $6,900 $15,900 Pietro expects to produce 52,500 units and sell 51,800 units. The beginning inventory of finished goods is $43,500, and the ending inventory of finished goods is expected to be $35,000.

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

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

Answer 1

1)

	Statement of Cost of Goods Sold
	Beginning F.G inventory				$    43,500.00
Add:	Cost of Goods Manufactured			(W.N)	$ 452,600.00
	Cost of goods available for sale				$ 496,100.00
Less:	Ending F.G inventory				$ (35,000.00)
	Cost of goods sold				$ 461,100.00

W.N

	Schedule of Cost of Goods Manufactured
	Direct materials:
	Beginning R.M inventory			$      7,000.00
Add:	Purchase of R.M			$ 125,500.00
	Total R.M available			$ 132,500.00
Less:	Ending R.M inventory			$     (6,900.00)
	R.M used in production				$ 125,600.00
	Direct labor				$    66,000.00
	Manufacturing OH				$ 263,000.00
	Total manufacturing costs				$ 454,600.00
Add:	Beginning WIP Inventory				$    13,900.00
					$ 468,500.00
Less:	Ending WIP inventory				$ (15,900.00)
	Cost of goods manufactured				$ 452,600.00

2) If beginning inventory of finished goods decreases by $ 3,000, Cost of Goods sold also decreases by $ 3,000