Access over 20 million homework & study documents

search

Production cost

Content type
User Generated
Rating
Showing Page:
1/4
Production Costs 1
Production Costs
April 10, 2017
Accounting 561
Monique Smalling
Introduction

Sign up to view the full document!

lock_open Sign Up
Showing Page:
2/4
Production Costs 2
For this week’s assignment, the following scenario will be addressed. “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. The following paper includes a memo to Mr. Skaors that explains why the production
cost report showed 2,000 units of inventory and why this was not done in error. This case study
also focuses on determining equivalent units in a production unit setting.
Memo
I would first like to thank you for your concern in regards to the 2,000 equivalent units in
ending inventory. It is very understandable with the history of your department that someone in
your position would make sure that all inventory and production is accurate. I can also assure
you that there has been no error on the cost report that was provided to you. I first would like to
bring your attention to what is meant by equivalent units of production. “An equivalent unit of
production is an indication of the amount of work done by manufacturers who have partially
completed units on hand at the end of an accounting period. ( Rehman )” This basically means
that not all ending units are completed but all units, both partially completed and fully
completed, are included in the equivalent units. For instance, let’s say the department began with
no units in inventory and it started and completed 10,000 units. It also started an additional 1,000
units that were 20% complete. The equivalent units of production that will be reported is 10,200.
This includes the 10,000 completed units plus 20% of the partially completed 1,000 units. This
may seem confusing at first but it gives us an idea of how much work is completed at the end of

Sign up to view the full document!

lock_open Sign Up
Showing Page:
3/4

Sign up to view the full document!

lock_open Sign Up
End of Preview - Want to read all 4 pages?
Access Now
Unformatted Attachment Preview
Production Costs 1 Production Costs April 10, 2017 Accounting 561 Monique Smalling Introduction Production Costs 2 For this week’s assignment, the following scenario will be addressed. “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.” The following paper includes a memo to Mr. Skaors that explains why the production cost report showed 2,000 units of inventory and why this was not done in error. This case study also focuses on determining equivalent units in a production unit setting. Memo I would first like to thank you for your concern in regards to the 2,000 equivalent units in ending inventory. It is very understandable with the history of your department that someone in your position would make sure that all inventory and production is ac ...
Purchase document to see full attachment
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Anonymous
Really helpful material, saved me a great deal of time.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Similar Documents