Process costing methods rely extensively on managers estimates of percentage
Process costing methods rely extensively on managers’ estimates of percentage of completion for both costing products and calculating equivalent units of production. While most managers understand the importance of accurate estimates to the integrity of their process costing systems, they also have incentives to produce profits for their shareholders.
Required:
Discuss how incorrect estimates could be used to artificially boost profits, considering the issue from the perspectives of both managers and shareholders.
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