A cost of production report is A cost of production report is prepared for each processing prepared for each processing department

at periodical intervals. department at periodical intervals.

Cost of Production Report Cost of Production 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 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 Cost charge to the Deptt: Cost added by the department: Materials…………………………………………… Labor……………………………………………….. FOH………………………………………………… Total cost to be accounted for Cost accounted as follows: Transfer to next deptt (25,000×4)…………………….. W-I-P (ending inventory): Material (3200×2)…………………………………….. Labor (2,000×1.5)…………………………………….. FOH( 2,000×0.5)……………………………………… Total cost accounted for Total cost Rs.56,400 40,500 13,500 Rs.110,400 Rs.100,000 Rs.6,400 3,000 1,000 Unit cost Rs.2 15 0.5 Rs.4 30,000

30,000

10,400 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.

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