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In: AccountingGary Stevens and Mary James are production managers in theConsumer Electronics Division of General Electronics...Gary Stevens and Mary James are production managers in theConsumer Electronics Division of General Electronics Company, whichhas several dozen plants scattered in locations throughout theworld. Mary manages the plant located in Des Moines, Iowa, whileGary manages the plant in El Segundo, California. Productionmanagers are paid a salary and get an additional bonus equal to 5%of their base salary if the entire division meets or exceeds itstarget profits for the year. The bonus is determined in March afterthe company’s annual report has been prepared and issued tostockholders. Shortly after the beginning of the new year, Maryreceived a phone call from Gary that went like this:Gary: How’s it going, Mary?Mary: Fine, Gary. How’s it going with you?Gary: Great! I just got the preliminary profit figures for thedivision for last year and we are within $200,000 of making theyear’s target profits. All we have to do is pull a few strings, andwe’ll be over the top!Mary: What do you mean? Gary: Well, one thing that would be easyto change is your estimate of the percentage completion of yourending work in process inventories.Mary: I don’t know if I can do that, Gary. Those percentagecompletion figures are supplied by Tom Winthrop, my leadsupervisor, who I have always trusted to provide us with goodestimates. Besides, I have already sent the percentage completionfigures to corporate headquarters.Gary: You can always tell them there was a mistake. Think aboutit, Mary. All of us managers are doing as much as we can to pullthis bonus out of the hat. You may not want the bonus check, butthe rest of us sure could use it.The final processing department in Mary’s production facilitybegan the year with no work in process inventory. During the year,210,000 units were transferred in from the prior processingdepartment and 200,000 units were completed and sold. Coststransferred in from the prior department totaled $39,375,000. Nomaterials are added in the final processing department. A total of$20,807,500 of conversion cost was incurred in the final processingdepartment during the year.Required: 1. Tom Winthrop estimated that theunits in ending work in process inventory in the final processingdepartment were 30% complete with respect to the conversion costsof the final processing department. If this estimate of thepercentage completion is used, what would be the cost of goods soldfor the year?2. Does Gary Stevens want the estimated percentage completion tobe increased or decreased?3. What percentage completion would result in increasingreported net operating income by $200,000 over the net operatingincome that would be reported if the 30% figure were used?