Jem Dawson and Jason Rogers are production managers in the Printed Circuit Boards (PCB) Division of Sunrise
Question:
Jem Dawson and Jason Rogers are production managers in the Printed Circuit Boards (PCB) Division of Sunrise Circuits, Inc., an international company. The PCB Division factories use process-costing, FIFO method. Jem manages the factory in Phoenix, Arizona, and Jason manages the factory in Schaumburg, Illinois. Production managers are salaried employees. They are also eligible for an additional bonus of 7.5% of their annual salary if the PCB Division profit is equal to or greater than the budgeted target profit. Sunrise Circuits’ fiscal year ended January 31, 2022. Once the external audit is completed and financial statements are issued in April, bonus eligibility will be determined. Jem and Jason attended a company training meeting in February 2022. Below is an excerpt from their conversation during a refreshment break.
Jem: Hi Jason. I’m glad I ran into you. I hope everything is well.
Jason: I can’t complain. How about you?
Jem: Pretty good. I recently saw the preliminary PCB Division profit figures for last fiscal year and we are just $250,000 below the budgeted target profit. If we can get a little inventive, we can make up that difference to reach the target!
Jason: Not sure how we can do that?
Jem: Well, we do have some flexibility. In particular, profits could be increased with a simple change to your estimated percentage of completion for ending work in process inventory.
Jason: I don’t have a basis for doing that. The percentage of completion estimates were determined by Phil Baker who is an experienced employee with a track record of developing good estimates.
Jem: Anyone can have an off year. You can just say that Phil made a mistake. We are so close to the target. I don’t know about you, but most of us are counting on a bonus.
The following table summarizes some data in the last process in Jason’s factory (Schaumburg, IL) for the fiscal year ended January 31:
Beginning work in process units —
Transferred in units 231,000
Units completed and sold 220,000
Costs transferred in $41,002,500
Conversion costs $22,441,650
Ending work in process percentage 30%
of completion (conversion)
________________________________________________________________________________________________
* 100% of materials are added prior to the last process.
Requirements
1. Based on information in the above table, calculate the cost of goods sold for the fiscal year ended January 31. Show your work. Your supporting work should include an equivalent units schedule (prepared in good form).
2. If Jem’s suggestion is followed, how should the percentage be changed? That is, generally state whether it should increase or decrease (specific amount NOT required) and explain your
Supply Chain Management A Logistics Perspective
ISBN: 978-0538479196
9th edition
Authors: John coyle, John Langley, Robert Novack, Brain Gibson