1

EVAPORATION
-a special type of unavoidable loss in production similar to
shrinkage.
-normal loss that is expected in certain products due to the nature
of the materials that compose the product and the required
manufacturing process.
-computations involved working backwards to arrive at original
quantities from available production data which is generally net of
the evaporation loss. (Matz, 1991)

Illustration:

Evaporation Co. Manufactures its product, Condensada, in two

successive departments, I and II. In Department II, the process
takes 20 days, during which the product or units in process suffer
10% evaporation proportionately with the process. During the
month of March, Department I transferred to Department II, 30,000
units at a cost of P 60,000. Operations of Department II for the month
follows:

Units: In process, March 975 (1/4)

Transferred to storeroom 25,200
In process, March 31 2,850
Costs: In process, March 1 P 2,000
Materials 39,200
Labor 25,000
Overhead 15,000

Computations needed in the preparation of the cost of production

report for Evaporation Co., as follows:

- First, compute for the rate of evaporation:

Rate of evaporation per day = 10% = .005/day
20 days
- Computation of original quantities:
In process, beginning = 975 units with 1/4 stage of
completion
Days in process = 1/4 x 20 days = 5 days
Evaporation % = 5 days x .005/day = .025
Original volume is:
975 = 1- 0.025
975/0.975 = 1,000 (original volume)

1
 2

Finished and transferred: 25,200 units and has suffered 10%

evaporation

Original volume =25,200/90% = 28,000 units

Note: Of the 28,000 units, 1,000 originally came from beginning in

process and 27,000 units coming from units started in process.

EVAPORATION CO.
COST OF PRODUCTION REPORT
For the Month ended, March 31, 202X
Department II

Quantity Schedule:
Actual Net Work Equivalent
Done Units of Production
In Process, March 1 1,000
Received from Dept. 1 30,000
To be acctd. For 31,000

Accounted for as follows:

In Process, March 1 1,000 900 3/4 675
Started this month 27,000 24,300 100% 24,300
In Process, March 31 3,000 2,850 1/2 1,425
Units as accounted for 31,000
Equivalent Production 26,400

Cost Analysis Total Cost Unit Cost

Materials P 39,200
Labor 25,000
Overhead 15,000
Total Factory Cost P 79,200 P 3.00
Add: In Process, March 1 2,000
Cost Department 1 60,000 2.00
Total Cost to be accounted for P 141,200 P 5.00

Accounted for as follows:

Transferred to storeroom 25,200u
In Process, March 1 ( 900 units)
Cost last month P 2,000
Cost this month( 900 x P 3 x 75%) 2,025 P 4,025
Received from Dept. 1 (24,300 u)
Cost Dept. 1 (27,000 x 2) P 54,000
Cost, Dept. II (24,200 x 3) 72,900 126,900
Total Costs of goods manufactured P 130,925
In Process, March 31 2,850 u
Cost , Dept. 1(3,000 units x P 2) P 6,000
Cost, Dept. 2 (2,850 units x P3 x 1/2) 4,275 10,275
Total Costs as accounted for P 141,200