Production Costs, accounting homework help

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Business Finance

Description

Scenario: Davis Skaros has recently been promoted to production manager. He has just started to receive various managerial reports, including the production cost report you prepared. It showed his department had 2,000 equivalent units in ending inventory. His department has had a history of not keeping enough inventory on hand to meet demand. He has come to you, very angry, and wants to know why you credited him with only 2,000 units when he knows he had at least twice that many on hand.

Prepare a maximum 700-word informal memo and explain to Mr. Skaros why his production cost report showed only 2,000 equivalent units in ending inventory. Using a professional tone, explain to him clearly why your report is accurate.

Format the assignment consistent with APA guidelines.

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Explanation & Answer

Attached. please review.

Running head: MEMO

1

Informal memo on Production cost report
Student’s Name:
School Affiliation:
Date:

MEMO

2
Informal memo on Production cost report

In preparing the production report, there are several things I considered by Generally Accepted
Accounting Principles (GAAP). First, I considered number of sales that was made in that
particular period as at the date of preparing the production report. During that period, the
organization had substantially made progressive sales. This was attributed to customer focus
strategies that were implemented at the start of the trading period. Secondly, the production cost
also increased tremendously, and that is why we were not able to make a lot of production. In
other words, the organization reported decreased amount of production and the sales volume
increased unexpectedly. As such, as much as the organization aspired to have a higher ending
inventory, to enable business continuity in the next trading period, we only reported only 2000
equivalent units of inventory.
Irrefutably, when the cost of production is high, the sales margin increases proportionately.
Normally, in a manufacturing organization, to arrive at gross profit, the value of initial inventory
plays the greater role. For example, the starting inventory value is used to project the business
continuity in the proceeding trading period. However, an ending inventory value serves as the
starting inventory for the next operation period. This means, to sustain business operations, as
well as meet customer demand, the amount of starting inventory is paramount. An opening
inventory in a company serves two purposes. First, it acts as buffer stock that an organization
uses to meet market dem...


Anonymous
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