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The final processing department in Alex’s production facility began the year with no work in process inventories. During the year, 210,000 units were transferred in from the prior processing department and 200,000 units were completed and sold. Costs transferred in from the prior department totaled $39,375,000. No materials are added in the final processing department. A total of $20,807,500 of conversion cost was incurred in the final processing department during the year.

Required:

1. Ron Leslie estimated that the units in ending inventory in the final processing department were 30% complete with respect to the conversion costs of the final processing department. If this estimate of the percentage completion is used, what would be the Cost of Goods Sold for the year?
2. Does John Gillis want the estimated percentage completion to be increased or decreased? Explain why.
3. What percentage completion would result in increasing reported net operating income by $200,000 over the net operating income that would be reported if the 30% figure were used?
4. Do you think Alex James should go along with the request to alter estimates of the percentage completion? Why or why not?