Question

1. Cost of Goods Sold

   Pietro Frozen Foods, Inc., produces frozen pizzas. For next year, Pietro predicts that 50,500 units will be produced, with the following total costs:

   Direct materials	?
   Direct labor	51,000
   Variable overhead	19,000
   Fixed overhead	200,000

   Next year, Pietro expects to purchase $129,500 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	$14,000
   Ending	$5,900	$16,000

   Pietro expects to produce 50,500 units and sell 49,800 units. Beginning inventory of finished goods is $47,500, and ending inventory of finished goods is expected to be $39,000.

   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
   	$
   	$
   	$

   2. What if the beginning inventory of finished goods decreased by $5,250? What would be the effect on the cost of goods sold?
     by $

Answer 1

1	Pietro Frozen Foods Inc.
	Schedule of Cost of goods sold
	For the coming year
	Direct Materials
	Beginning Inventory	$       6,000
Add:	Purchases	$ 1,29,500
	Material available	$ 1,35,500
Deduct:	Ending Inventory	$       5,900
	Total Material used	$ 1,29,600
Add:	Direct Labour	$     51,000
Add:	Manufacturing overheads ($200000 + $19000)	219000
	Total manufacturing cost	$ 3,99,600
Add:	Beginning Work in process inventory	$     14,000
Deduct:	Ending Work in process inventory	$     16,000
	Cost of goods manufactured	$ 3,97,600
Add:	Beginning Finished goods	$     47,500
Deduct:	Ending Finished goods	$     39,000
	Cost of goods sold	$ 4,06,100
2	When the Beginning Finished goods decrease by $5,250, Cost of goods sold decreases by $5,250
	Cost of goods manufactured	$ 3,97,600
Add:	Beginning Finished goods ($47,500 - $5,250)	$     42,250
Deduct:	Ending Finished goods	$     39,000
	Cost of goods sold	$ 4,00,850
	Cost of goods sold decreases by $5,250 ($406100-$400850)