The final processing department in Carol's production facility began the year with no work in process inventories. During the year, 270,000 units were transferred in from the prior processing department and 250,000 units were completed and sold. Costs transferred in from the prior department totaled $49,221,000. No materials are added in the final processing department. A total of $16,320,000 of conversion cost was incurred in the final processing department during the year.
Jean Jackson estimated that the units in ending inventory in the final processing department were 25% complete with respect to the conversion costs of the final processing department. If this estimate of the percentage completion is used, what would be the cost of goods sold for the year?
2. Does Thad Kostowski want the estimated percentage completion to be increased or decreased? Explain why.
3. What percentage completion figure would result in increasing the reported net operating income by $62,500 over the net operating income that would be reported if the 25% figure were used?
4. Do you think Carol Lee should go along with the request to alter estimates of the percentage completion? Why or why not?