CASES S6-16 Ethics and the Manager: Understanding the Impact of Percentage ompletion on Profit ILO2, LO3, LO4 connect n Bieler and Nancy Delirion are production managers in the Appliances Division of Mees ororation which has several dozen plants scattered in locations throughout the world. Oclirion manages the plant in Toronto while Bieler manages the plant in Vancouver. Production managers are paid a salary and get an additional bonus equal to 10% of their base salary if the ire division meets or excceds its target profits for the year. The bonus is determined in ason rch after the company's annual report has been prepared and issued to shareholders. Late in February. Delirion received a phone call from Bieler that went like this Bieler: Hows it going, Nancy? Delirion: Fine. Jason. How's it going with you? eler: Great! I just got the preliminary profit figures for the division for last year and we are within $62.500 of making the years target profits. All we have to do is to pull a few strings nd well be over the top Delirion: What do you mean? Bieler: Well. one thing that would be easy to change is your estimate of the percentage com pletion of your ending work in process inventories Delirion: I don't know if I should do that Jason. Those percentage completion numbers are supplied by Marita Janovski, my lead supervisor. I have always trusted her to provide us with good esti mates. Besides. I have already sent the percentage completion figures to corporate headquarters ers are doing as much as we can to pull this bonus out of the hat. You may not want the Bieler: You can always tell them there was a mistake. Think about it. Nancy. All of us manag bonus cheque, but the rest of us sure could use it The final processing department in Delirion's production facility began the year with no work inventories. During the year 270000 units were transferred in from the prior pro epartment and 250,000 units were completed and sold. Costs transferred in from the prior in department totalled $49221000. No materials are added in the final processing department. A total f $16 320000 of conversion cost was incurred in the final processing department during the year Required Janovski estimated that the units in ending inventory in the final processing department were 25% complete with respect to the conversion costs of the final processingdepartment. If this estimate of the percentage completion is used. what will be the cost of goods sold for the year? oes Bieler want Delirion to increase or decrease the estimated percentage completion? Explain why What percentage completion figure would result in increasing the reported operating income by $62,500 over the operating income that would be reported if the 25% figure were used? Do you think Delirion should go along with the request to alter estimates of the percent age completion? Why or why not