Refer to Cornerstone Exercises 2.2 and 2.3. 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. Be sure to include the percent of sales column.
2. What if the cost of goods sold percentage for the past few years was 65 percent? Explain how management might react.

Exercises 2.2 and 2.3

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Refer to Cornerstone Exercise 2.1. 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 end- ing inventories for direct materials and work in process are as follows: Direct Materials Work-in-Process Inventory Inventory $5,600 Beginning Ending S12,500 14,600 4,900