Week 4 Assignment 2: Purpose Of Assignment And Materials Cov

Question

Week 4 Assignment 2purpose Of Assignmentthe Materials Covered This We 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) Tutorial help on Excel® and Word functions can be found on the Microsoft® Office website. There are also additional tutorials via the web offering support for Office products. Scenario: Davis Skaros has recently been promoted to production manager. The company uses process costing. 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 saw on his production line at the end of the month 4,000 units. Prepare a maximum 300-word response and explain to Mr. Skaros why his production cost report showed only 2,000 equivalent units in ending inventory. In accounting terms, explain to him the concept of equivalent units versus the physical units on the production floor.

Dr. Jack HW Helper · Accepted Answer

Dear Mr. Skaros, I understand your concern regarding the discrepancy between the 4,000 units you observed on the production line and the 2,000 equivalent units reported in the production cost report. It’s important to clarify the concepts of physical units and equivalent units in process costing to understand this difference. Physical units refer to the actual count of units physically present in inventory or in production—here, the 4,000 units you saw on the line. In contrast, equivalent units represent a measure used in process costing to convert partially completed units into a number of fully completed units, based on the degree of completion of the work done on them. Essentially, equivalent units serve as a bridge to allocate costs accurately across differing levels of work-in-progress. In process costing, when units are not 100% complete, they are counted as fractions of a completed unit. For example, if a batch of units is 50% complete regarding materials or labor, then each of those units counts as 0.5 equivalent units. Therefore, the report’s figure of 2,000 equivalent units indicates that, considering their degree of completion, the work in progress constitutes the equivalent of 2,000 fully finished units, even though physically, 4,000 units are present. This approach ensures that costs are assigned proportionally to the completed work, providing a more accurate picture of production costs than merely counting physical units. In summary, while you see 4,000 units physically, the 2,000 equivalent units reflect how much work has been completed on those units. This distinction is fundamental in process costing to ensure accurate cost allocation and financial reporting. Sincerely, [Your Name] References Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2021). Intermediate Accounting (17th ed.). Wiley. Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2020). Managerial Accounting (16th ed.). McGraw-Hill Education. Horngren, C. T., Datar, S. M., & Raj

Week 4 Assignment 2purpose Of Assignmentthe Materials Covered This We

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