Let’s begin by discussing when job order

Let’s begin by discussing when job order

Part 1Question 1: Let’s begin by discussing when job order costing systems would be more effectivethan a process costing system. Please give examples of types of businesses where each would beappropriate. Do these costing systems apply only to manufacturing?Question 2: What is a predetermined overhead rate, and how is it computed?Question 3: Does anyone have any real-life examples and/or experiences with job order orprocess costing systems?Part 2Go to page 166 and read Case 4-19, Ethics and the Manager: Understanding the Impact ofPercentage Completion on Profit. Let’s address the questions, provide reasons for our answers,share relevant personal experiences, and provide value-added comments, articles, and relatedwebsites. Let’s have a lot of interaction.All applicable cases are available with McGraw-Hill’s Connect™ Accounting .CASE 4–19 Ethics and the Manager; Understanding the Impact of Percentage Completion onProfit [LO2, LO3, LO4]Thad Kostowski and Carol Lee are production managers in the Appliances Division of MesgerCorporation, which has several dozen plants scattered in locations throughout the world. Carolmanages the plant located in Kansas City, Missouri, while Thad manages the plant in Roseville,Oregon. Production managers are paid a salary and get an additional bonus equal to 10% of theirbase salary if the entire division meets or exceeds its target profits for the year. The bonus isdetermined in March after the company’s annual report has been prepared and issued tostockholders.Late in February, Carol received a phone call from Thad that went like this:Thad: How’s it going, Carol?Carol: Fine, Thad. How’s it going with you?Thad: Great! I just got the preliminary profit figures for the division for last year and we arewithin $62,500 of making the year’s target profits. All we have to do is to pull a few strings, andwe’ll be over the top!Carol: What do you mean?Thad: Well, one thing that would be easy to change is your estimate of the percentage completionof your ending work in process inventories.Carol: I don’t know if I should do that, Thad. Those percentage completion numbers are suppliedby Jean Jackson, my lead supervisor. I have always trusted her to provide us with good estimates.Besides, I have already sent the percentage completion figures to the corporate headquarters.Thad: You can always tell them there was a mistake. Think about it, Carol. All of us managers aredoing as much as we can to pull this bonus out of the hat. You may not want the bonus check, butthe rest of us sure could use it.The final processing department in Carol’s production facility began the year with no work inprocess inventories. During the year, 270,000 units were transferred in from the prior processingdepartment and 250,000 units were completed and sold. Costs transferred in from the priordepartment totaled $49,221,000. No materials are added in the final processing department. Atotal of $16,320,000 of conversion cost was incurred in the final processing department duringthe year.Required:Question 1: Jean Jackson estimated that the units in ending inventory in the final processingdepartment were 25% complete with respect to the conversion costs of the final processingdepartment. If this estimate of the percentage completion is used, what would be the cost ofgoods sold for the year?Question 2: Does Thad Kostowski want the estimated percentage completion to be increased ordecreased? Explain why.Question 3: Do you think Carol Lee should go along with the request to alter estimates of thepercentage completion? Why or why not?


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