Income Statement

Bobs Bistro produces party-sized hoagie sandwiches. For next year, Bobs Bistro predicts that 52,000 units will be produced with the following total costs:

Direct materials	?
Direct labor	$50,000
Variable overhead	30,000
Fixed overhead	180,000

Next year, Bobs Bistro expects to purchase $118,500 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	$4,000	$14,600
Ending	$3,900	$16,600

Next year, Bobs Bistro expects to produce 52,000 units and sell 51,300 units at a price of $17.00 each. Beginning inventory of finished goods is $38,500, and ending inventory of finished goods is expected to be $30,000. Total selling expense is projected at $23,000, and total administrative expense is projected at $130,000.

Required:

Question Content Area

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.

			Percent
Administrative expensesCost of goods soldGross marginSalesSelling expenses		$- Select -	- Select -%
Administrative expensesCost of goods soldGross marginOperating incomeSelling expenses		- Select -	- Select -%
Administrative expensesCost of goods soldGross marginOperating incomeSelling expenses		$- Select -	- Select -%
Less: Operating expenses
Cost of goods soldGross marginOperating incomeSalesSelling expenses	$- Select -
Administrative expensesCost of goods soldGross marginOperating incomeSales	- Select -	- Select -	- Select -%
Operating incomeOperating loss		$- Select -	- Select -%

Question Content Area

2. What if the operating expenses percentage for the past few years was 40.16 percent? Management's reaction might be: