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7) Greg, the production manager for the Blending Department approached Martha, the production manager for the Packaging Department regarding the company's profit targets for the year ending June 30th. Based on preliminary profit figures, the company is within $2,5000 of the month's target profit. Greg has asked Martha to pull a few strings to assure they will reach their target and all employees will receive a bonus. Greg indicates that Martha can just change her estimate of the percentage completion of her ending work in process inventories. Martha is unsure. Greg says that he has worked hard to keep costs down in his department and does not want to lose his bonus because Martha couldn't keep her department under control. a) Would Martha need to increase or decrease the estimated percentage completion to increase the company's operating profit? Explain your answer. b) Since the cost categories, "transferred in" and "bottles" are not affected by the estimated percent of completion, we can limit our analysis here to the two categories that are affected by percent completion. Assume Martha were to change her estimated percentage completion by 10 in the desired direction. (Change % from 25% to 15% or 35%); i) What will the revised equivalent units be for "Other Materials" and "Conversion" cost categories for the Bottling Department? Equivalent units in ending WIP- Packaging inventory Equivalent units completed and transferred to finished goods Total Equivalent units to account Revised Equivalent Units Other Material Conversion 7) Greg, the production manager for the Blending Department approached Martha, the production manager for the Packaging Department regarding the company's profit targets for the year ending June 30th. Based on preliminary profit figures, the company is within $2,5000 of the month's target profit. Greg has asked Martha to pull a few strings to assure they will reach their target and all employees will receive a bonus. Greg indicates that Martha can just change her estimate of the percentage completion of her ending work in process inventories. Martha is unsure. Greg says that he has worked hard to keep costs down in his department and does not want to lose his bonus because Martha couldn't keep her department under control. a) Would Martha need to increase or decrease the estimated percentage completion to increase the company's operating profit? Explain your answer. b) Since the cost categories, "transferred in" and "bottles" are not affected by the estimated percent of completion, we can limit our analysis here to the two categories that are affected by percent completion. Assume Martha were to change her estimated percentage completion by 10 in the desired direction. (Change % from 25% to 15% or 35%); i) What will the revised equivalent units be for "Other Materials" and "Conversion" cost categories for the Bottling Department? Equivalent units in ending WIP- Packaging inventory Equivalent units completed and transferred to finished goods Total Equivalent units to account Revised Equivalent Units Other Material Conversion
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The percentage of completion method is an accounting method in which the revenues and expenses of longterm contracts are recognized as a percentage of the work completed during the period This is in c... View the full answer
Related Book For
Quantitative Methods for Business
ISBN: 978-0324651751
11th Edition
Authors: David Anderson, Dennis Sweeney, Thomas Williams, Jeffrey cam
Posted Date:
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