7a

Greg, the production manager for the Forming Department approached Martha, the production manager for the Packaging Department regarding the company's profit targets for the year ending May 31st. Based on preliminary profit figures, the company is within $25,000 of the month's target profit. Greg has asked Martha to pull a few strings to assure they will reach their target such that all employees will receive a bonus. Greg indicates that Martha can just change her estimate of the percentage completion of her ending work in process inventories. Martha is unsure. Greg says that he has worked hard to keep costs down in his department and does not want to lose his bonus because Martha could not keep her department under control.

Would Martha need to increase or decrease the estimated percentage completion to increase the company's operating profit? How would this impact each cost category?