Income Statement

Pietro Frozen Foods, Inc., produces frozen pizzas. For next year, Pietro predicts that 51,700 units will be produced, with the following total costs:

Direct materials?Direct labor65,000Variable overhead23,000Fixed overhead245,000

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 InventoryWork-in-Process InventoryBeginning$6,000$14,000Ending$5,900$16,000

Next year, Pietro expects to produce 51,700 units and sell 51,000 units at a price of $14.00 each. Beginning inventory of finished goods is $41,500, and ending inventory of finished goods is expected to be $33,000. Total selling expense is projected at $26,500, and total administrative expense is projected at $116,000.

Required:

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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.

Note: due to rounding, percentages may not add down.

PercentAdministrative 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 -%

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2. What if the cost of goods sold percentage for the past few years was 63.14 percent? Management's reaction might be:

Further analyze sales reportsGrant bonuses to production personnelTrim administrative staffInvestigate production cost management