Clonex Labs, Inc., uses the weighted average method in its process costing system. The following data are available for the finishing department for April: Percent Completed Materials Conversion 65 % 30 % 80 % 40 % Units 30,000 15,000 Work in process, April 1 Work in process, April 30 Tim is a production manager at Clonex and his compensation is tied to the company-wide profit. Specifically, Tim will receive cash bonus of $100,000 if the company-wide profit exceeds the predetermined performance target. Based on his preliminary analysis, Tim realizes that the company profit is likely to below the performance target in April. As such, Tim is contemplating to adjust the estimated percentage of completion in the finishing department (either materials or conversion, or both) so as to increse the company profit. Suppose that the production level is at capacity at Clonext Labs, so changing the level of production is not an available option. 1. Do you think Tim should change the estimated percentage of completion to receive his cash bonus? Please provide your reason(s). 2. Suppose that Tim decides to adjust the estimated percentage of completion in the finishing department. Explain whether Tim should increase or decrease the estimated percentage of completion (with regard to materials and/or conversion). Clonex Labs, Inc., uses the weighted average method in its process costing system. The following data are available for the finishing department for April: Percent Completed Materials Conversion 65 % 30 % 80 % 40 % Units 30,000 15,000 Work in process, April 1 Work in process, April 30 Tim is a production manager at Clonex and his compensation is tied to the company-wide profit. Specifically, Tim will receive cash bonus of $100,000 if the company-wide profit exceeds the predetermined performance target. Based on his preliminary analysis, Tim realizes that the company profit is likely to below the performance target in April. As such, Tim is contemplating to adjust the estimated percentage of completion in the finishing department (either materials or conversion, or both) so as to increse the company profit. Suppose that the production level is at capacity at Clonext Labs, so changing the level of production is not an available option. 1. Do you think Tim should change the estimated percentage of completion to receive his cash bonus? Please provide your reason(s). 2. Suppose that Tim decides to adjust the estimated percentage of completion in the finishing department. Explain whether Tim should increase or decrease the estimated percentage of completion (with regard to materials and/or conversion)
