REPORTER: Sanita, Shaira Mica, V.

TOPIC: The Cost of Production Report

 THE COST
OF PRODUCTION
REPORT

BSA 2A-SANITA, SHAIRA MICA, V.

 - An analysis of the activity
in the department or cost
center for the period. All
costs chargeable to a
department or cost center
are presented according to
cost elements.

BSA 2A-SANITA, SHAIRA MICA, V.

 WAREHOUSING
the process of storing physical goods
before they are sold or further
distributed. Warehouses safely and
securely store products in an
organized way to track where items
are located, when they arrived, how
long they have been there, and the
quantity on hand.

BSA 2A-SANITA, SHAIRA MICA, V.

 SELLING
a transaction where a good or
service is being exchanged for
money. It also refers to the
process of persuading a person
or organization to buy
something.

BSA 2A-SANITA, SHAIRA MICA, V.

 Comprehensive Illustration:
STAR PAPER COMPANY
Cutting
Department

Packaging Assembly
Department Department

BSA 2A-SANITA, SHAIRA MICA, V.

 EQUIVALENT PRODUCTION
The measure of work represents a technique
done during the month, through which
express in fully incomplete units are
completed units. expressed as
completed units.

BSA 2A-SANITA, SHAIRA MICA, V.

 EQUIVALENT UNITS
defines by C.I.M.A. are calculated by
as: “notional whole multiplying the
units representing number of physical
completed work”. (or actual) units on
hand by the
percentage of
completion of the
BSA 2A-SANITA, SHAIRA MICA, V.
 QUANTITY SCHEDULE

QUANTITY TO BE ACCOUNTED FOR QUANTITY ACCOUNTED FOR

Shows the number and Shows what happened

source of the units to the units presented in
processed during the the first half of the
month. Quantity Schedule
BSA 2A-SANITA, SHAIRA MICA, V.
 COST SCHEDULE

COST TO BE ACCOUNTED FOR COST ACCOUNTED FOR

Shows the total cost for Shows the production

which an accounting cost of the month.
must be made..

BSA 2A-SANITA, SHAIRA MICA, V.

 “ If small errors occur as a result of rounding off numbers,
the cost of units transferred out of the department, as
shown in Section (d) of the Cost Schedule, is adjusted to
absorb the rounding error.”

BSA 2A-SANITA, SHAIRA MICA, V.

 CUTIING ASSEMBLY PACKAGING
Materials 77, 280 21, 830 2, 172
Labor 95, 616 82, 954 24, 492
Overhead 156, 632 69, 856 14, 596
Total Costs Incurred 329, 528 174, 640 41, 260
Transferred In - 264, 480 399, 350
Transferred Out (264, 480) (399, 350) (304 080)
Balance January 31 65, 048 39, 770 136, 530

BSA 2A-SANITA, SHAIRA MICA, V.

 PREPARATION FOR
COST OF PRODUCTION
REPORT

BSA 2A-SANITA, SHAIRA MICA, V.

 STEP 1: QUANTITY SCHEDULE
STEP 2: CALCULATE EQUIVALENT UNITS AND
UNITS COSTS
STEP 3: DETERMINE THE COSTS TO BE
ACCOUNTED FOR
STEP 4: ACCOUNT FOR ALL COSTS

BSA 2A-SANITA, SHAIRA MICA, V.

 METHODS OF COSTING
UNDER PROCESS
COSTING

BSA 2A-SANITA, SHAIRA MICA, V.

 FIFO METHOD
An assumed flow of manufacturing operations
and as such it is considered that those units which
are first placed in process are presumed to be the
first ones completed and those that are first
completed are the ones transferred out
EQUIVALENT UNITS= COST ADDED
DURING THE PERIOD/EQUIVALENT
UNITS

BSA 2A-SANITA, SHAIRA MICA, V.

 Characteristics
1. The work in process beginning in the
department will require a separate
computation for its equivalent production.

2. The units started, completed and transferred

will have its own computation for equivalent
production

BSA 2A-SANITA, SHAIRA MICA, V.

 WEIGHTED AVERAGE METHOD
No assumed flow of manufacturing operations.
Involves merging of the departmental costs.

EQUIVALENT UNITS= COST LAST

PERIOD + COST ADDED THIS PERIOD /
EQUIVALENT UNITS (WORK DONE LAST
PERIOD + WORK DONE THIS PERIOD)

BSA 2A-SANITA, SHAIRA MICA, V.

 Characteristics
1. In the computation of the equivalent
production, the stage of completion of the
work in process beginning is ignored and the
total units completed and transferred during
the period is considered to have 100%
completion.

BSA 2A-SANITA, SHAIRA MICA, V.

 METHODS OF
APPLICATION OF
ELEMENTS OF COST TO
PRODUCTIION
BSA 2A-SANITA, SHAIRA MICA, V.
 EVEN APPPLICATION

At any stage during the process of production, the

introduction of 3 elements of cost are equal with
one another. Only one computation of equivalent
production should be made.

BSA 2A-SANITA, SHAIRA MICA, V.

 UNEVEN APPPLICATION

The introduction of the elements of cost to

production varies at any stage of the process,
hence, there should be as many computations of
equivalent as the elements of cost that are
unevenly applied

BSA 2A-SANITA, SHAIRA MICA, V.

 CONTENTS
OF
PRODUCTION REPORT

BSA 2A-SANITA, SHAIRA MICA, V.

 1.Any costs transferred to it,
from a preceding
department

2. Cost on materials, labor,

and overhead incurred by
the department

3. Unit cost added by the

department
BSA 2A-SANITA, SHAIRA MICA, V.
 4. Cumulative costs, unit,
and total to the end of
operation in the department

5. The value of opening and

ending work in process
inventories

6. Costs of transfer to a
succeeding department or to
a finished goods stockroom
BSA 2A-SANITA, SHAIRA MICA, V.
 THE USE OF PROCESS
COST SYSTEM

BSA 2A-SANITA, SHAIRA MICA, V.

 - Used by companies that manufacture on a
continuous basis only one or few product that are
homogenous.

- Ideal in the accounting for costs in mass

production.

- The costs of materials, labor and overhead are

accounted for in the usual manner.

BSA 2A-SANITA, SHAIRA MICA, V.

 REPORTER: Sanita, Shaira Mica, V.

TOPIC: The Cost of Production Report

 EVEN APPLICATION
OF
COST ELEMENTS

BSA 2A-SANITA, SHAIRA MICA, V.

 EVEN APPPLICATION

At any stage during the process of production, the

introduction of 3 elements of cost are equal with
one another. Only one computation of equivalent
production should be made.

BSA 2A-SANITA, SHAIRA MICA, V.

 EVEN APPPLICATION

Assumption is made that materials, labor, and

overhead costs are applied evenly and
proportionately from start of the process to the
end.

BSA 2A-SANITA, SHAIRA MICA, V.

 UNEVEN APPLICATION
OF
COST ELEMENTS

BSA 2A-SANITA, SHAIRA MICA, V.

 UNEVEN APPPLICATION

A more practical approach in connection with a

realistic production. Material cost is applied
differently from conversion cost.

BSA 2A-SANITA, SHAIRA MICA, V.