Description
WEEK FOUR
Production Costs
oDue Sep 24, 6:00 PM (PST)
oNot Submitted
oPOINTS 5
- Scenario
- no new messages
Objectives:
- 4.1
- 4.2
- 4.3
Purpose of Assignment
The materials covered this week distinguish between the different costing methods and provides needed tools for decision making. This case study focuses on determining equivalent units in a production business setting.
Assignment Steps
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.
Format the assignment consistent with APA guidelines.
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Explanation & Answer
Attached.
Running head: PRODUCTION COSTS
1
Product Costs
Name
Institution
Date
PRODUCTION COSTS
2
To: Skaros (Production Manager)
From: Accounts Department
Date
Subject matter: The Ending Inventory
So as to known well the discussion coming from the production department, it is always
important to consider the benefits of stock management and the best approach to obtaining and
maintaining the inventory. A fruitful inventory supports in making a personal decision about
what to purchase, the amount to purchase, the place to purchase from and the place to store the
goods (Axsäter, 2015). Different heads of departments have different interests concerning the
stock within a given organization.
The main aim of stock management is to uphold the stock in such a way that there no
cases of under-stocking or even over-stocking. The over-stocking takes place when liquidity is
diminishing and when maintaining other production means and it usually results to a slowdown
of operations in a given company. Consequently, any interest in stock should always be kept
below certain limits. The two primary objectives of stock management are usually the money
and operation related (Axsäter, 2015). The operational objectives show that materials have to
access in a simple and in enough amount with the main goal of making sure there is no any
interference of the work for the purpose of the stock. On the other hand, the money related
objective show that interests in inventories have to be kept below specified limits.
The cost of production per department indicates that all the costs which are unpredictable
should be given to a specific secto...