Question

Pietro Frozen Foods, Inc., produces frozen pizzas. For next year, Pietro predicts that 50,000 units will be produced, with the following total costs:

Direct materials	?
Direct labor	$54,000
Variable overhead	15,000
Fixed overhead	245,000

Next year, Pietro expects to purchase $124,500 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	$5,000	$10,600
Ending	$4,900	$12,600

Required:

1. Prepare a statement of cost of goods manufactured.

Pietro Frozen Foods, Inc.
Statement of Cost of Goods Manufactured
For the Coming Year
Direct materials
Beginning inventory	$
Add: Purchases
Materials available	$
Less: Ending inventory
Direct materials used in production		$
Direct labor
Manufacturing (Factory) overhead
Total manufacturing costs added		$
Add: Beginning work in process
Less: Ending work in process
Cost of goods manufactured		$

2. What if the ending inventory of direct materials increased by $2,300? Indicate the affect that this would have on the items listed below:

	Direction of change			Amount
Direct materials used		by		$
Total manufacturing costs		by		$
Cost of goods manufactured		by		$

Answer 1

1. Preparation of the Statement of Cost of goods manufactured : Pietro Frozen Foods, Inc. Statement of Cost of goods manufactured Particulars Amount ($) Direct Materials : Beginning Inventory $ 5,000 Add : Purchases 1,24,500 Materials Available 1,29,500 Less : Ending Inventory 4,900 Direct Materials used in Production 1,24,600 Direct Labor 54,000 Manufacturing (Factory) Overheads 2,60,000 Total Manufacturing Costs Added 4,38,600 Add : Beginning Work-in-Process 10,600 Less : Ending Work-in-Process 12,600 Cost of goods manufactured 4,36,600 to o o o o o o o o o 2. What if the ending inventory of direct materials increased by $2,300? Indicate the affect that this would have on the items listed below :

Pietro Frozen Foods, Inc. Statement of Cost of goods manufactured Particulars Amount ($) Direct Materials : Beginning Inventory $ 5,000 Add : Purchases $ 1,24,500 Materials Available 1,29,500 Less : Ending Inventory 7,200 Direct Materials used in Production 1,22,300 Direct Labor 54,000 Manufacturing (Factory) Overheads 2,60,000 Total Manufacturing Costs Added 4,36,300 Add : Beginning Work-in-Process 10,600 Less : Ending Work-in-Process 12,600 Cost of goods manufactured $ 4,34,300 $ $ Effect on : Direct Materials used in Production Total Manufacturing Costs Cost of goods manufactured Direct of Change Decrease by Decrease by Decrease by Amount ($) $ 2,300 2,300 $ 2,300