Production Costs Generally Accepted Accounting Principles

timer Asked: Jan 1st, 2018
account_balance_wallet $15

Question description

Resources: Generally Accepted Accounting Principles (GAAP), U.S. Securities and Exchange Committee (SEC)

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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.

Tutor Answer

School: UT Austin

Thank you so much

Running head: Memo


Institution affiliation:


To: Production Manager, David Skaros
From: The Accounting Department
Subject: Ending Inventory
The reason as to why you misunderstood the quantity of the ending inventory of your

department is because of the fact there exists two different ways for measuring inventory
quantity. The way information about the ending inventory will be utilized determines which way
to adopt when determining inventory quantity. The two ways in which the ending inventory can
be measured in are either in physical units or equivalent units.
Whenever the stage of completion is not regarded when determining the ending
inventory, then the inventory has been measured in physical units. This is so since, this are actual
units that are to be accounted for within a certain period with no regard to the work performed.
When determining the ending inventory in physical units, units t...

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Outstanding Job!!!!

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