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Income Statement

Bobs Bistro produces party-sized hoagie sandwiches. For next year, Bobs Bistro predicts that 48,800 units will be produced with the following total costs:

Direct materials	?
Direct labor	$51,000
Variable overhead	18,000
Fixed overhead	195,000

Next year, Bobs Bistro expects to purchase $122,500 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	$12,400
Ending	$5,900	$14,400

Next year, Bobs Bistro expects to produce 48,800 units and sell 48,100 units at a price of $14.00 each. Beginning inventory of finished goods is $48,500, and ending inventory of finished goods is expected to be $40,000. Total selling expense is projected at $30,000, and total administrative expense is projected at $124,500.

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.

Bob's Bistro Income Statement For the Coming Year

			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 -%

2. What if the operating expenses percentage for the past few years was 54.38 percent? Management's reaction might be:

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