o Turk Telekom 20:21 ezto.mheducation.com 9612 Gary Stevens and Mary James are p
ID: 2602537 • Letter: O
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o Turk Telekom 20:21 ezto.mheducation.com 9612 Gary Stevens and Mary James are production managers in the Consumer Electronics Division of General Electronics Company, which has several dozen plants scattered in locations throughout the world. Mary manages the plant located in Des Moines, lowa, while Gary manages the plant in El Segundo, California. Production managers are paid a salary and get an additional bonus equal to 10% of their base salary if the entire division meets or exceeds its target profits for the year. The bonus is determined in March after the company's annual report has been prepared and issued to stockholders Shortly after the beginning of the new year, Mary received a phone call from Gary that went like this Gary: How's it going, Mary? MaryFine, Gary. How's it going with you? Gary: Great! I just got the preliminary profit figures for the division for last year and we are within $142,450 of making the year's target profits. All we have to do is pull a few strings, and we'll be over the top! Mary What do you mean? Gary: Well, one thing that would be easy to change is your estimate of the percentage completion of your ending work in process inventories. I don't know if I can do that, Gary. Those percentage completion figures are supplied by Tom Winthrop, my lead supervisor, who I have always trusted to provide us with good estimates. Besides, I have already sent the percentage completion figures to corporate headquarters. Mary: Gary You can always tell them there was a mistake. Think about it, Mary. All of us managers are doing as much as we can to pull this bonus out of the hat. You may not want the bonus check, but the rest of us sure could use it. The final processing department in Mary's production facility began the year with no work in process inventories. During the year, 290,000 units were transferred in from the prior processing department and 259,000 units were completed and sold. Costs transferred in from the prior department totaled $80,330,000. No materials are added in the final processing department. A total of $20,006,250 of conversion cost was incurred in the final processing department during the year Required: Tom Winthrop estimated that the units in ending inventory iExplanation / Answer
1.
2. Increased
3. at 26% (rounded off) desired profit out come comes.
to increase profit, cost of goods sold should be decreased by that much of amount, to make it happen percentage completion of inventory should be increased which assigns costs to inventory instead of cost of goods sold.
below is the result ( with given rounding off norms)
Prior processing department costs 80,330,000 Costs incurred 20,006,250 A Costs to account for 100,336,250 % completion EU Units completed 259,000 100% 259,000 Closing wip 31,000 25% 7,750 B units to account for 290,000 266,750 C=A/B Cost per Equivalent unit 376.14 Assignment of costs Equivalent unit Per unit Total Cost of goods sold 259,000 376.14 97,420,260Related Questions
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