1. 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	$60,000
   Variable overhead	25,000
   Fixed overhead	220,000

   Next year, Pietro expects to purchase $119,300 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	$5,600	$12,500
   Ending	4,900	14,600

   Next year, Pietro expects to produce 50,000 units and sell 49,300 units at a price of $12.50 each. Beginning inventory of finished goods is $42,500, and ending inventory of finished goods is expected to be $34,000. Total selling expense is projected at $26,000, and total administrative expense is projected at $134,000.

   Required:

   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.

   2. What if the cost of goods sold percentage for the past few years was 65 percent? Management's reaction might be: