Krugerrand
Meow
You make a very valid point but I gave a short-cut explanation so that non-accountants may undertand better.
Everyone has a different level of accounting knowledge so please don't think I am talking down to you.
I am going to explain this in simple terms not only because Cost Accounting is complex but because other members reading this may not understand accounting principles.
Let use these numbers:
Fremont Q1: Fixed Costs of $300m and 86,000 cars produced = $3,500 fixed costs per car
Fremont Q2: Fixed Costs of $300m and 50,000 cars produced = $6,000 fixed costs per car
Because of the shutdown with only 50,000 cars produced, margins were hurt by $125m.
The fixed costs per car in Q2 is higher by $2,500 ($6,000 - $3,500 = $2,500)
Since cost per car is higher in Q2 vs Q1 - then 50,000 autos at a higher cost of $2,500 = $125m
Once Q3 gets back to 86.000 unit or higher, margins will improve by $125m (as mentioned earlier this could be as high as $250m)
Now...your confusion was valid. I won't do the math here but if Idle Capacity Accounting was not applied, about $88m of the $125m would have been expensed anyway to the P&L as cars were sold but about $37m would have been on the balance sheet with the 15,000 cars remaining in inventory. Tesla uses FIFO (First In - First Out) Method for inventory.
But my main point is that we will see margins improve by $125m to $250m in Q3 as production ramps back up and fixed costs per car decline back to $3,500.
Everyone confused by now? I am!
You know what my level of accounting knowledge is; if Jack bought 5 magic beans and planted 3 of them, how many beers does he have left in the fridge?
You accountants always trying to add drama and mystery and shoot outs and car chases and hidden rooms under 800 year old churches full of buried treasure to your job to make it more than the snooze fest it is. (Yeah, don’t care how I ended that sentence.) You will never be confused for John Wick. Ever. The end.