It takes 7-10 days to create a Jelly Belly jelly bean at the company’s two plants in Fairfield, CA and North Chicago, IL. This is how they are created: 

1. Getting started: Mixing the center of each jelly bean in a kettle. The mixture is sweetened and flavored. The main ingredients are sugar, flavored syrup, corn starch, and food coloring. 

2. Taking shape: The hot center mix is then individually dispensed by machine into tiny impressions in large trays. Each tray features 1,260 bean-shaped impressions and contains cornstarch to help the mix harden. 

3. Firming up: In their trays, the still-soft center mixtures are moved to drying rooms to cool off and become firm. 

4. Showered in sugar: When firm, the centers are sent through a moisture steam bath before having sugar poured over them. They are then set aside for another 24-48 hours before getting their outer shells. 

5. Thoroughly engrossed: Around 200 pounds of jelly bean centers are heaped into a rotating stainless steel drum called an engrossing pan. As they tumble, employees add four layers of flavored syrups and sugar, building shells around the centers over a two-hour period. 

6. Polished to perfection: About 400 pounds of jelly beans are then dropped into rotating stainless steel pans while having confectioners glaze poured over them. The beans rotation causes them to roll over one another, creating a high-gloss finish on each one. Afterward they are set aside for another 24-48 hours. 

7. Quality control: to make sure that each JB jelly bean is perfect, they go into a machine which checks each bean against JB standards for size, letting only the perfect beans fit through the screens. Any beans that don’t make the grade are “Belly Flops!” Then the beans are inspected by hand by a quality assurance specialist who picks out any imperfections. 

8. Name that bean: When their glaze has hardened, the beans are again placed in trays, then passed under a printing roller filled with food coloring. The roller prints the Jelly Bean name on each and every bean, even the white ones. 

9. Ready to go: Special machines dispense the finished Jelly Belly jelly beans into various forms of packaging, like gift boxes, bags, and jars. Each package is filled with precisely the correct amounts and flavors. 

10. Futuristic assistants: Robotic arms move the packaged products onto large pallets. The pallets are loaded onto trucks, which carry the products to candy stores, supermarkets, gift shops and gourmet food stores throughout the U.S. and to 46 countries around the world. 

Questions for discussion:

1. At the end of each accounting reporting period, Jelly Belly’s employees must estimate the percentage of completion for ending work-in-process inventory in each of the processes. What challenges do employees face in making these estimates? Explain in a minimum of 3 short bullet points.

2. An error was made in computing the percentage of completion of the ending WIP inventory for the current reporting period. The error resulted in assigning a higher percentage of completion to each component of the inventory than actually was the case. Assume that there was no beginning inventory. What is the effect of this error on:

a. The computation of total equivalent units? (understate or overstate?)

b. The computation of costs per equivalent units? (understate or overstate?)

c. Costs assigned to cost of goods transferred out to finished goods for the period? (understate or overstate?)

d. Costs assigned to cost of goods sold? 

e. Costs assigned to ending WIP inventory? 

f. Operating income?