Income Statement

Pietro Frozen Foods, Inc., produces frozen pizzas. For nextyear, Pietro predicts that 53,700 units will be produced, with thefollowing total costs:

Direct materials	?
Direct labor	72,000
Variable overhead	23,000
Fixed overhead	250,000

Next year, Pietro expects to purchase $127,500 of directmaterials. Projected beginning and ending inventories for directmaterials and work in process are as follows:

	Direct materials Inventory	Work-in-Process Inventory
Beginning	$6,000	$13,300
Ending	$5,900	$15,300

Next year, Pietro expects to produce 53,700 units and sell53,000 units at a price of $17.00 each. Beginning inventory offinished goods is $42,500, and ending inventory of finished goodsis expected to be $34,000. Total selling expense is projected at$29,500, and total administrative expense is projected at$112,500.

Required:

1. Prepare an income statement in good form.Round the percent to four decimal places before converting to apercentage. For example, .88349 would be rounded to .8835 andentered as 88.35.

Pietro Frozen Foods, Inc.
Income Statement
For the Coming Year
			Percent
Sales		$	%
Cost of goods sold			%
Gross margin		$	%
Less operating expenses:
Selling expenses	$
Administrative expenses			%
Operating income		$	%

2. What if the cost of goods soldpercentage for the past few years was 50.17 percent? Management'sreaction might be: