UNIVERSITY OF NUEVA CACERES

City of Naga

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 complete) 6,000 (3/4 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 Done Equivalent
Production
Units for be Accounted For:
Started in Process 10,000

Units Accounted For:

Started, finished and transferred to the next department 7,000 100% 7,000
Still in process at the end 3,000 50% 1,500
10,000 8.500
 Cost Analysis: Total Cost Unit cost
Materials Php 12,750.00
Labor 7,650.00
Overhead 5,100.00
Factory Cost to be Accounted For Php 25,500 Php 3.00

Cost Accounted for as Follows:

Units completed and transferred (7,000 units x Php 3.00) Php 21,000.00
Units still in process at the end (1,500 units x Php 3.00) 4,500.00
Total Cost Accounted For Php 25,500.00

Department A
Cost of Production Report
Month Ended April 30, 20xx

Quantity Schedule:
Actual Work Done Equivalent
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 and transferred 3,000 50% 1,500
Started, finished and transferred to the next department 9,000 100% 9,000
Still in process at the end 6,000 75% 4,500
18,000 15,000

Cost Analysis: Total Cost Unit cost

a. Work in Process, May 1 Php 4,500.00
b. Cost added during the month:
Materials Php 24,000.00
Labor 14,400.00
Overhead 9,600.00
Php 48,000.00
Factory Cost to be Accounted For (a + b) Php 52,500
Unit Cost (Php 48,000.00/15,000 EUP) Php 3.20

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 4,500.00
Cost this month (1,500 x Php 3.20) 4,800.00 Php 9,300.00
2. Units started, finished and transferred: 9,000 units
(9,000 units x Php 3.20) 28,800.00
Total Cost of 12,000 units completed and transferred Php 38,100.00
b. Units still in process at the end 6,000 units 14,400.00
(6,000 units x 75% x Php 3.20) Php 52,500.00

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 next Department 15,000 15,000 20,000
Work in Process, July 31 5,00 5,000 2,000
Stage of completion ½ 2/5 ½

Costs:
Work in process, July 1 Php 5,000.00 Php 67,500.00 Php 118,500.00
Costs incurred in July:
Materials 85,000.00 7,500 40,000.00
Labor 51,000.00 45,000.00 60,000.00
Overhead 34,000.00 22,500.0 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 Done Equivalent 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 Done Equivalent Production

Cost Analysis:

Cost Accounted For as Follows:

Finishing Department
Cost of Production Report
Month Ending July 31, 20xx

Quantity Schedule:
Actual Work Done Equivalent 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 complete 1,000
Started in process 11,000
In process, August 31, 3/10 complete 2,000
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 Done EUP Work Done EUP

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 next Department 42,000 44,000
In Process, September 30 8,000 6,000
Stage of completion 2/5 2/3

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 Done EUP Work Done EUP

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 Done EUP Work Done EUP

Cost Analysis:

Cost Accounted For as Follows: