Jay Stolz and Ben Moyer are the plant managers for Southern Lumber's particle board divi- sion Southern Lumber has adopted a just-in-time management philosophy. Each plant com- bines wood chips with chemical adhesives to produce particle board to order, and all produc- tion is sold as soon as it is completed. Laura Dagosta is Southern Lumber's regional controller. All of Southern Lumber's plants and divisions send Dagosta their production and cost infor- mation. While reviewing the numbers of the two particle board plants. she is surprised that both plants estimate their ending work in process inventories at 80% complete, which is higher than usual. Dagosta calls Moyer, whom she has known for some time. He admits that to ensure their division met its profit goal and both he and Stolz made their bonus (which is based on division profit), he and Stolz agreed to inflate the percentage completion. Moyer explains. "Determining the percent complete always requires judgment. Whatever the per- cent complete, we'll finish the work in process inventory first thing next year." Required 1. How would inflating the percentage completion of ending Work in Process inventory help Stolz and Moyer get their bonus? 2. The particle board division is the largest of Southern Lumber's divisions. If Dagosta does not correct the percentage completion of this year's ending work in process inventory, how will the misstatement affect Southern Lumber's financial statements? 3. Evaluate Moyer's justification, including the effect, if any, on next year's financial state- ments. 4. += Link Back to Chapter 7. Apply the ethical framework from Chapter 7 (page 290) in con- sidering what Dagosta should do.