E3-9 Memo - equivalent to 40 units of equivalent production...

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Memo DATE: February 25, 2008 TO: Mary Mahr, Production Manager FROM: RE: Production Cost Report I understand your concern in regard to the production cost report. In an attempt to clarify the information contained in the report let me explain why the report only showed 1,000 equivalent units in ending inventory. Given the nature of production process some units may remain incomplete at the time of accounting for the total cost of production and the ending inventory. In such a situation some units are complete while others are incomplete. For the cost accumulation purposes, the partially completed units are converted into comparable units For instance, 100 units of inventory estimated to be 40% complete are considered
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Unformatted text preview: equivalent to 40 units of equivalent production. Equivalent units are the number of complete whole units one could obtain from the materials and effort contained in partially completed units. There in the present scenario, the partially completed units may be more than 1000, but if we convert it into one whole unit it becomes 1000. Equivalent units= Number of partially completed units * Stage of production For example: 2000 units are 50% complete than, equivalent units= 2000*50%=1000 I hope that you find the above explanation satisfactory in regard to your production cost report only showing only 1,000 equivalent units in ending inventory. Thank you. Memo...
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E3-9 Memo - equivalent to 40 units of equivalent production...

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