Of the two departments that this company has, this assignment focuses on the finishing department. Before the finishing department, products are assembled in the assembly department before transferring to the finishing department. Conversion costs are added uniformly, and direct materials are added when the conversion process is 30% complete.

Suppose that the firm uses weighted average, and the estimate of % completion for ending WIP in December was made carelessly, and the real % completion was 10%. Assume that all the units completed in the Finishing process were sold during December. Is income overstated or understated as a result of the error in the % completion estimate? By how much is it overstated or understated? Present a process costing report using the correct completion %, and write a one-paragraph explanation of how this estimation error affected profit.

The table below shows relevant data for the Finishing Department in December 2017. Physical Units Transferred-in Direct Costs Materials Conversion Costs Beginning WIP, December 1, 2017 900 $60,000 $0 $12,000 % completion, beginning WIP 20% Transferred in during December 2017 4,000 Completed and transferred out during December 2017 4,120 Ending WIP, December 31, 2017 780 % completion, ending WIP 50% Costs added during December 2017 $160,000 $25,000 $90,000