Reference no: EM132567220
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 below.
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
Question (a) Explain how the CEO and CFO expect to increase profit (net income) for the year by boosting production?
Question (b) Is the request made by the CEO and CFO ethical? Explain your answer.
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