Question

Mary is the production manager of the potato chip division. She gets bonus equal to 10% of her base salary if the division meets its target profit. She realized that the preliminary profit figures for the division is $10,000 below the target profit. She is considering changing the estimated percentage completion with respect to materials and conversion in ending work in process inventory of the final processing department to increase the profit. Does Mary want the percentage completion to be increased or decreased? Briefly explain your reasoning. Do you think Mary should change the percentage completion? Why or why not?

Answer 1

Ans:

1

Yes, the mary is intending to increase the percentage of completion.

As increasing the percentage of completiojn of Work in Proggress results increases the closing stock value resulting increse in the

profit of the department. By making this changes mary may get desired profits that helps for 10% bonus on her basic pay.

2

As changing in percentage completion of stock to get the personnel benfit out of it is not ethical.

And an employee should be worked for the benfit of the organisation. Mary should not change the percentage of completion

because it effects the true performance of the organisation resulting wrong reporting and this results wrong decisions based on those reports.