A

A cost
cost of
of production
production report
report isis
prepared
prepared for
for each
each processing
processing
department
department atat periodical
periodical intervals.
intervals.
 Cost
Cost of
of Production
Production Report
Report
The cost of production report provides the
following production quantity and cost data:
 The units for which the department is
accountable and the deposition of those
units.
 The production costs incurred by the
department and the allocation of those
costs between completed and partially
completed units.
 Cost of production Report

Quantity Schedule:
 Units started in the process

 Units transfer to the next department

 Units still in process

 Units lost in process

Cost charge to the Department:

Cost added by the department:

 Materials

 Labor

 FOH

Total cost to be accounted for

Cost accounted as follows:
 Transfer to next department:
 W-I-P (ending inventory):

 Material

 Labor

 FOH

Total cost accounted for

 Equivalent Units...

– is a measure of the amount of

work done during a production
period, expressed in terms of fully
completed units.
 ABC Corporation
Department (A)
Cost of Production Report
For the Month of December, 2009

Quantity Schedule:
Units started in the process 30,000

Units transfer to the next deptt.......................................................25,000

Units still in process(80% Material, 50% Labor & FOH)……… 4,000
Units lost in process…………………………………………… 1,000 30,000

Cost charge to the Deptt: Total cost Unit cost

Cost added by the department:

Materials…………………………………………… Rs.56,400 Rs.2

Labor……………………………………………….. 40,500 15
FOH………………………………………………… 13,500 0.5
Total cost to be accounted for Rs.110,400 Rs.4
Cost accounted as follows:
Transfer to next deptt (25,000×4)…………………….. Rs.100,000
W-I-P (ending inventory):
Material (3200×2)…………………………………….. Rs.6,400
Labor (2,000×1.5)…………………………………….. 3,000
FOH( 2,000×0.5)……………………………………… 1,000 10,400
Total cost accounted for Rs110,400
 Disposition of Departmental Cost

“Cost accounted for as Follows” shows the disposition of

cost that is charged to the department.

The balance between the two costs is the cost of work in

process.

Inventory figure must be broken into its components that

are Material, Labor and Factory overhead.
 Lost Units
 Management is interested in comparison of
planned and actual results.
 Reconciliation is done for verifying the

reported figures.
Percent yield= wt. of finished product × 100
wt. materials charged in

 This yield figure is useful to management for

controlling purposes.
 Units Lost in 1 Department
st

 Reduce the number of units

 Increase in unit cost.

 The loss is assumed to apply to all good units

 DEPARTMENT (B)
• 25,000 units transferred to Department (B)

• Labor and factory overhead were added

• Cost of production report of department (B) is

different from department (A)
 Different in following aspects

1. cost receive from previous department

2. adjusted preceding department’s unit cost

3. Cost received from preceding department to be

included in cost of ending work in process.
 Units Lost in Department Subsequent
to the First
• An increase in unit cost by Rs.0.8

• Cost of lost units can be computed by following

methods

1. Determine unit cost for preceding department and subtract it

from previous.
The difference will show additional cost due to lost units.
 2. Multiply the lost units with previous per unit
cost and divide by remaining units.

• The lost unit cost adjustment must be entered in

the Cost of Production Report.

• Cost of any work done on lost units

automatically absorbed by equivalent production
figures.