Pacific Siding Incorporated produces synthetic wood siding used in the construction of residential and commercial buildings. Pacific Siding's fiscal year ends on March 31, and the weighted average method is used for the company's process costing system. Financial results for the first 11 months of the current fiscal year (through February 28) are well below the expectations of management, owners, and creditors. Halfway through the month of March, the chief executive officer (CEO) and the chief financial officer (CFO) ask the controller to estimate the production results for the month of March in the form of a production cost report (the company has only one production department). This report is shown as follows. Data Entry Section Unit Information Units (board feet) Percent Complete Direct Direct Materials Labor Overhead 280,000 n/a n/a n/a Units in beginning WIP inventory (all completed this period) Units started and completed during the period Units started and partially completed during the period 155,000 1008 1008 100% 73,000 40 20 Cost Information Costs in beginning WIP inventory Costs incurred during the period Direct materials $79,000 58,000 60 Direct labor $93,000 78,000 Overhead $153,000 138,000 PACIFIC SIDING INCORPORATED Preliminary Production Cost Report Month Ending March 31 Step 1: Summary of Physical Units and Equivalent Unit Calculations Physical Units to be accounted for: Units Units in beginning WIP inventory 280,000 Units started during the period 228,000 Total units to be accounted for 508,000 Units accounted for: Units completed and transferred out Units in ending WIP inventory Physical Units 435,000 73,000 Equivalent Units Direct Direct Materials Labor Overhead 435,000 435,000 435,000 29, 200 43,800 14,600 PACIFIC SIDING INCORPORATED Preliminary Production Cost Report Month Ending March 31 Step 1: Summary of Physical Units and Equivalent Unit Calculations Physical Units to be accounted for: Units Units in beginning WIP inventory 280,000 Units started during the period 228,000 Total units to be accounted for 508,000 Equivalent Units Physical Direct Direct Units accounted for: Units Materials Labor Overhead Units completed and transferred out 435,000 435,000 435,000 435,000 Units in ending WIP inventory 73,000 29, 200 43,800 14,600 Total units accounted for 508,000 464,200 478,800 449,600 Step 2: Summary of Costs to Be Accounted for Costs to be accounted for: Costs in beginning WIP inventory Costs incurred during the period Total costs to be accounted for Direct Direct Materials Labor Overhead Total $ 79,000 $ 93,000 $153,000 $325,000 58,000 78,000 138,000 274,000 $ 137,000 $171,000 $291,000 $599,000 Step 3: Calculation of Cost per Equivalent Unit Total costs to be accounted for (a) Total equivalent units accounted for (b) Cost per equivalent unit (a) + (b) Direct Direct Materials Labor Overhead Total $ 137,000 $171,000 $291,000 464,200 478, 800 449,600 $ 0.2951 $ 0.3571 $ 0.6472 $ 1.2995 Step 4: Assign Costs to Units Transferred Out and Units in Ending WIP Inventory Direct Direct Materials Labor Overhead Total Costs assigned to units transferred out $ 128,382 $155,357 $281,550 $565, 289 Costs assigned to ending WIP inventory 8,618 15,643 9,450 33,711 Total costs accounted for $599,000 Armed with the preliminary production cost report for March, and knowing that the company's production is well below capacity, the CEO and CFO decide to produce as many units as possible for the last half of March, even though sales are not expected to increase any time soon. The production manager is told to push his employees to get as far as possible with production, thereby increasing the percentage of completion for ending WIP inventory. However, since the production process takes three weeks to complete, all of the units produced in the last half of March will be in WIP inventory at the end of March. Required: b. Using the following assumptions, prepare a revised estimate of production results in the form of a production cost report for the month of March. Assumptions based on the CEO and CFO request to boost production: 1. Units started and partially completed during the period will increase to 240,000 (from the initial estimate of 73,000). This is the projected ending WIP inventory at March 31. 2. Percentage of completion estimates for units in ending WIP inventory will increase to 80 percent for direct materials, 85 percent for direct labor, and 90 percent for overhead. 3. Costs incurred during the period will increase to $98,000 for direct materials, $105,000 for direct labor, and $153,000 for overhead (Note: most overhead costs are fixed). 4. All units completed and transferred out during March are sold by March 31. c. Compare your new production cost report with the one prepared by the controller. How much do you expect profit to increase as a result of increasing production during the last half of March? d. Is the request made by the CEO and CFO ethical? Complete this question by entering your answers in the tabs below. Required B Required C Required D Using the following assumptions, prepare a revised estimate of production results in the form of a production cost report for the month of March. Assumptions based on the CEO and CFO request to boost production: 1. Units started and partially completed during the period will increase to 240,000 (from the initial estimate of 73,000). This is the projected ending WIP inventory at March 31. 2. Percentage of completion estimates for units in ending WIP inventory will increase to 80 percent for direct materials, 85 percent for direct labor, and 90 percent for overhead. 3. Costs incurred during the period will increase to $98,000 for direct materials,$105,000 for direct labor, and $153,000 for overhead Month Ending March 31 Physical Units Equivalent Units Direct Direct Materials Labor Overhead Total Units to be accounted for Units in beginning WIP inventory Units started during the period Total units to be accounted for 0 Units accounted for Units completed and transferred out Units in ending WIP inventory Total units accounted for 0 0 0 0 Costs to be accounted for Costs in beginning WIP inventory Costs incurred during the period Total costs to be accounted for $ 0 $ 0 $ 0 $ 0 Cost per Equivalent Unit Total costs to be accounted for Total equivalent units accounted for Cost per equivalent unit 0 0 $ 0.0000 Costs assigned to units transferred out Costs assigned to ending WIP inventory Total costs accounted for $ 0 $ 0 $ 0 0 Complete this question by entering your answers in the tabs below. Required B Required C Required D Compare your new production cost report with the one prepared by the controller. How much do you expect profit to increase as a result of increasing production during the last half of March? Increasing profit Complete this question by entering your answers in the tabs below. Required B Required C Required D Is the request made by the CEO and CFO ethical? Yes ONO