PROCESS COSTING
COST OF PRODUCTION REPORT
COST OF PRODUCTION REPORT
Companies track costs flows by departmental production report that describe the materials,
labor and overhead by each processing department during a given accounting period. The
initial department is the department that begins producing a product. A subsequent
department is a processing department that continue the further processing to produce the
desired finished product. Cost flow refers to the physical flow of the cost of the product as it
moves from the initial department to subsequent department. The flow of the unit and costs of
the product under the process is captured in the Cost of Production Report which is prepared by
each processing department on a monthly basis.
Five steps in the preparation of the cost of Production Report:
1. Summarize the physical unit by preparing a quantity schedule.
2. Compute the output in terms of equivalent units of production.
3. Summarize the total cost to account for, which are the total debit in work in process.
4. Compute the unit cost.
5. Compute the total cost of unit completed and those that are still in process.
Although shortcuts are sometimes taken, the methodical procession through each of the five
steps minimizes error. The first two steps concentrate on what’s occulting in physical or
engineering terms. The peso impact of the production process is measured in the final three
steps.
SINGLE DEPARTMENT – FIFO COSTING – UNIFORM APPLICATION
Illustrative Problem:
The following data were taken from the Production Report of Department A for the month of
April and May:
Units April May
Work in Process, beginning 0 3,000 (1/2 complete)
Started in Process 10,000 15,000
Completed and transferred 7,000 12,000
Work in Process, ending 3,000 (1/2 6,000 (3/4 complete)
complete)
Costs:
Work in Process, beginning 0 Php 4,500.00
Costs added during the month:
Material Php 12,750.00 Php 24,000.00
Labor 7,650.00 14,400.00
Overhead 5,100.00 9,600.00
Total Php 25,500.00 Php 48,000.00
Required: Prepare a Cost of Production Report for the month of April and May.
Solution:
Department A
Cost of Production Report
Month Ended April 30, 20xx
Quantity Schedule:
Actual Work Equivalent
Done Production
Units for be Accounted For:
Started in Process 10,000
Units Accounted For:
Started, finished and transferred to 7,000 100% 7,000
the next department 3,000 50% 1,500
Still in process at the end 10,000 8.500
Cost Analysis: Total Cost Unit cost
Materials Php
Labor 12,750.00
Overhead 7,650.00
Factory Cost to be Accounted For 5,100.00 Php 3.00
Php 25,500
Cost Accounted for as Follows:
Units completed and transferred Php
(7,000 units x Php 3.00) 21,000.00
Units still in process at the end (1,500 4,500.00
units x Php 3.00) Php
Total Cost Accounted For 25,500.00
Department A
Cost of Production Report
Month Ended April 30, 20xx
Quantity Schedule:
Actual Work Equivalent
Done Production
Units for be Accounted For:
Units in process, beginning 3,000
Started in process 15,000
Total Units to be Accounted For 18,000
Units Accounted For:
Units in process, beginning completed 3,000 50% 1,500
and transferred 9,000 100% 9,000
Started, finished and transferred to 6,000 75% 4,500
the next department 18,000 15,000
Still in process at the end
Cost Analysis: Total Cost Unit cost
a. Work in Process, May 1 Php
b. Cost added during the month: 4,500.00
Materials
Labor Php
Overhead 24,000.00
14,400.00
Factory Cost to be Accounted For (a + 9,600.00
b) Php Php 3.20
Unit Cost (Php 48,000.00/15,000 EUP) 48,000.00
Php 52,500
Cost Accounted for as Follows:
a. Units completed and transferred 12,000 units
1. Work in process, beginning,
finished and transferred: 3000 units
Cost last month Php
Cost this month (1,500 x Php 4,500.00 Php 9,300.00
3.20) 9,000 units 4,800.00
2. Units started, finished and 28,800.00
transferred: Php
(9,000 units x Php 3.20) 6,000 units 38,100.00
Total Cost of 12,000 units completed 14,400.00
and transferred Php
b. Units still in process at the end 52,500.00
(6,000 units x 75% x Php 3.20)
COST OF WORK IN PROCESS BEGINNING, THEN COMPLETED AND TRANSFERRED
When there are units in process at the beginning of the costing period, the cost of these
units upon completion is computed as follows:
Cost of the previous month plus the cost needed to complete them this month.
Cost last month simply means the accumulated co9st when it was processed partially last
month. On the other hand, the cost added this month, pertains to the additional cost incurred
during the current month to bring it to its completion.
PLURAL DEPARTMENTS – FIFO COSTING – UNIFORM APPLICATION
Illustrative Problem:
The following production data were taken from the books of Greyhound Manufacturing Co.
which manufactures its product in three (3) successive departments namely, Cutting, Assembly
and Finishing:
Cutting Assembly Finishing
Units:
Work in Process, July 1 2,000 5,000 7,000
Stage of completion ¼ 2/5 1/7
Finished and transferred to the 15,000 15,000 20,000
next Department 5,00 5,000 2,000
Work in Process, July 31 ½ 2/5 ½
Stage of completion
Costs:
Work in process, July 1 Php 5,000.00 Php 67,500.00 Php
Costs incurred in July: 118,500.00
Materials 85,000.00 7,500
Labor 51,000.00 45,000.00 40,000.00
Overhead 34,000.00 22,500.0 60,000.00
20,000.00
Required: Cost of Production Report for Cutting, Assembly and Finishing Departments.
Solution:
Cutting Department
Cost of Production Report
Month Ending July 31, 20xx
Quantity Schedule:
Actual Work Equivalent
Done Production
Cost Analysis:
Cost Accounted For as Follows:
Total Cost Accounted For can be presented in an equation:
● The Quantity Schedule can be expressed in an equation:
Work in Process, Beg + Units Started = Units Completed +
Work in Process, End
Using the above equation, we can determine the units started:
Assembly Department
Cost of Production Report
Month Ending July 31, 20xx
Quantity Schedule:
Actual Work Equivalent
Done Production
Cost Analysis:
Cost Accounted For as Follows:
Finishing Department
Cost of Production Report
Month Ending July 31, 20xx
Quantity Schedule:
Actual Work Equivalent
Done Production
Cost Analysis:
Cost Accounted For as Follows:
UNEVEN APPLICATION – FIFO METHOD – SINGLE DEPARTMENT
Illustrative Problem:
Diamond Manufacturing Co. manufactures a product in one department; all materials added at
the beginning of the process. Labor and overhead are applied uniformly about the process.
Production data for the month of August follows:
Units:
In process, August 1, 3/5 1,000
complete 11,000
Started in process 2,000
In process, August 31, 3/10
complete
Costs:
Work in process, August 1 Php 7,000.00
Costs incurred in July:
Materials 55,000.00
Labor 15,000.00
Overhead 10,000.00
Solution:
Diamond Manufacturing Company
Cost of Production Report
Month Ending August 31, 20xx
Quantity Schedule:
Materials Conversion Costs
Actual Work EUP Work EUP
Done Done
Cost Analysis:
Cost Accounted For as Follows:
UNEVEN APPLICATION – FIFO METHOD – PLURAL DEPARTMENTS
Illustrative Problem:
Wolverine Corporation operates two department with the following procedures:
Mixing – This department applies 60% of the materials at the start of the process, 40%
when the process is 4/5 completed while conversion costs are applied uniformly
throughout the process.
Finishing – This department adds all materials at the end of the process while conversion
costs are applied uniformly throughout the process
Production date for the month of September 30, 20xx follows:
Mixing Finishing
Units:
Units in process, September 1 10,000 8,000
Stage of completion ¾ 4/5
Finished and transferred to the 42,000 44,000
next Department 8,000 6,000
In Process, September 30 2/5 2/3
Stage of completion
Costs:
Work in Process, September 1 Php 18,800.0 Php 55,600.00
Cost added this September:
Materials 81,600.00 44,000.00
Conversion 113,100.00 124.800.00
Solution:
Mixing Department
Cost of Production Report
Month Ending September 30, 20xx
Quantity Schedule:
Materials Conversion Costs
Actual Work EUP Work EUP
Done Done
Cost Analysis:
Cost Accounted For as Follows:
Finishing Department
Cost of Production Report
Month Ending September 30, 20xx
Quantity Schedule:
Materials Conversion Costs
Actual Work EUP Work EUP
Done Done
Cost Analysis:
Cost Accounted For as Follows:
