Companies often find that they have partially completed units in beginning and/or ending inventory. Rather than disregarding these partially completed units or including the entirety of their costs, companies will assess the degree of completion for both Direct Materials (DM) and Conversion Costs (CC) at the reporting date. This will eventually lead to the calculation of equivalent units that have been completed. Which of the following would be considered the most relevant source for management to draw upon to create their assessments?
A) Hypothetical forecasts drawn from a manager's experience at a different factory
B) Input received from sales staff personnel
C) Quotes received from suppliers for potential purchases
D) Results supported by purchase orders and invoices, materials requisitions, and corresponding costs already applied to WIP inventory

Question

Quizplus · Accepted Answer

In this instance, answer the question from the perspective of a manager. Of the choices provided, the actual results would be the most reliable source on which management could rely. This answer is the only choice that is based upon factual information and/or from parties directly involved in the production process.

Companies Often Find That They Have Partially Completed Units in Beginning