Cost Of Production Report
A departmental cost of production report receives all costs chargeable to a department. The cost of production report is not only the source for summary journal entries at the end of the month but also a most convenient vehicle for presenting and disposing of costs accumulated during the month.
A cost of production report shows:
(1) any cost, total and unit, transferred to it from a preceding department;
(2) materials, labor, and factory overhead added by the department;
(3) unit costs added by the department ;
(4) cumulative costs, total and unit, to the end of operations in the department ;
(5) the cost of opening and closing work in process inventories ; and
(6) cost transferred to a succeeding department or to a finished goods storeroom.
It is customary to divide the cost section of the report into two parts:
(a) one showing costs for which the department is accountable including departmental and cumulative total and unit costs, the other (b) showing the disposition of these costs.
A quantity schedule showing the total number of units for which a department is held accountable and the disposition made of these units is also part of each department’s cost of production report. Information in this schedule is used to determine the unit costs added by a department, the costing of closing work in process inventory, and the cost to be transferred out of the department.
A cost of production report determines periodic total and unit costs. However, a report that would merely summarize the total costs of materials, labor, and factory overhead and show only the unit cost for the period would not be satisfactory for controlling the costs. Total figures mean very little; cost control requires detailed data.
Therefore, in most instances, total costs are broken down by cost elements for each department head held responsible for the costs incurred. Furthermore, detailed departmental figures are needed because of the various completion stages of the work in process inventories.
The cost of production report acts as the source for summary journal entries at the end of the month. It also acts as the most convenient tool for presenting and disposing of costs accumulated during the month.
