Question

Cost of Goods Sold

Pietro Frozen Foods, Inc., produces frozen pizzas. For next year, Pietro predicts that 54,500 units will be produced, with the following total costs:

Direct materials	?
Direct labor	55,000
Variable overhead	26,000
Fixed overhead	225,000

Next year, Pietro expects to purchase $128,500 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	$14,500
Ending	$4,900	$16,500

Pietro expects to produce 54,500 units and sell 53,800 units. Beginning inventory of finished goods is $40,500, and ending inventory of finished goods is expected to be $32,000.

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 manufactured	$
Add: Beginning finished goods
Cost of goods available for sale	$
Less: Ending finished goods
Cost of goods sold	$

2. What if the beginning inventory of finished goods decreased by $5,750? What would be the effect on the cost of goods sold?
decrease  by $

Answer 1

Beginning direct materials inventory	5000
(+) Purchase of direct materials	128500
(-) Ending direct materials inventory	4900
Direct materials used	128600

Direct materials used	128600
Direct labor	55000
Variable overhead	26000
Fixed overhead	225000
Total manufacturing cost	434600
(+) Beginning work in process inventory	14500
(-) Ending work in process inventory	16500
Cost of goods manufactured	432600

Required 1 :
Pietro Frozen Foods, Inc.
Statement of cost of goods sold
For the coming year
Cost of goods manufactured	432600
Add: Beginning finished goods	40500
Cost of goods available for sale	473100
Less: Ending finished goods	32000
Cost of goods sold	441100

Required 2 :
Answer :
Decreases	by	$5,750