Job costing versus process costing

Job Order Costing Vs. Process Costing

3 Process Costing

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Learning Objectives

After studying Chapter 3, you will be able to:

• Differentiate among job and process cost systems.

• Understand the basic characteristics of modified and hybrid cost systems.

• Recognize the fundamental aspects of a job cost system.

• Describe the cost elements and cost flows in a process cost system.

• Compute the equivalent units of production and unit costs using FIFO.

• Prepare and use cost of production reports.

• Explain the impact that JIT inventory systems have on process cost accounting.

• Compute the equivalent units of production and unit costs using the weighted average method.

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Chapter Outline

3.1 Overview of Job and Process Costing Environment Materials, Labor, and Overhead Costs Focal Point for Cost Accumulation

3.2 Modified and Hybrid Systems

3.3 The Job Cost System

3.4 The Cost Elements in a Process Cost System Materials Conversion Costs Cost Flows

3.5 The Equivalent Unit Concept Unit Costs Flow of Physical Units Stage of Completion Timing of Inputs Computational Steps

3.6 Cost of Production Report Management’s Use of Cost of Production Reports Ethical Considerations

3.7 Simplifications of JIT and Automation

3.8 Weighted Average Cost Method Weighted Average Computational Steps Cost of Production Report

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Section 3.1 Overview of Job and Process Costing

Where There’s a Will, There’s a Way of Costing

When Stan Stein, an attorney, founded U Will It, he envisioned an enterprise involving the mass production of routine wills with standard wording and little variation. Because he kept his fees low and had clever advertising, his first two years were very successful. Stein was preparing wills for clients throughout Ohio.

Periodically, Stein was approached by clients who wished to have more specialized and complex wills prepared. Stein was reluctant to accept these jobs because his practice was near full capacity. Moreover, because these specialized wills required considerable research, client conferences, and other demands made by the clients, Stein did not feel his current practice was amenable to the preparation of specialized wills. Therefore, he would routinely turn down these requests.

One day, Stein decided to invest his growing profits into a new venture that would be oriented to preparing specialized wills. One of Stein’s many concerns was how he would determine the costs of these customized jobs. He knew that the process costing system used for his current firm would not be suitable for his new venture.

This chapter discusses how to determine the costs of products produced in a process cost environment as well as products produced in a job cost environment. Although we focus on manufactured products, the concepts presented are applicable in service organizations, as was just indicated in the above vignette.

3.1 Overview of Job and Process Costing A job cost system identifies costs with individual jobs or products. A separate tracking of costs is associated with each job or product. The costs accumulated for a job in process can be determined at any point in time by referring to the job order cost sheet.

A process cost system identifies costs with individual departments for an interval of time, such as one month. Costs are not charged to specific units or orders as work is performed, but unit costs are based on costs incurred during a time period and on the volume of output during the same period. The unit cost of a final product will be the sum of all costs allocated to the product by each department that worked on it.

Several other characteristics distinguish job costing from process costing, as discussed below. Figure 3.1 at the end of this section summarizes these differences.

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Section 3.1 Overview of Job and Process Costing

Environment Job costing is most appropriate in environments where jobs or products are different from one another. These jobs use different types or amounts of materials, labor, and overhead. Examples include building construction, defense contracting, consulting engagements, and printing shops.

Process costing is most appropriate in an environment where products are mass produced or result from continuous processing. Each unit going through the same process is identical to other units. Examples include candy, soft drinks, clothing, chemicals, and most processed foods. In addition, individual operations can be suitable for process costing if every prod- uct passing through the operation has the same work performed on it. For instance, various models of televisions and DVD players on an assembly line may have the same operations performed during the assembly process.

In a job cost environment, sales orders usually precede production. Production is for a spe- cific order. In a process cost environment, however, production usually precedes sales. Goods are produced for anticipated sales.

Materials, Labor, and Overhead Costs A process cost environment will generally use materials that are standard. In a job cost set- ting, materials requirements are often unique to each job, and sometimes even the types of materials needed are unknown. Hence, process cost companies usually have larger invento- ries of materials.

Tasks in a process cost environment are generally routine. Less-skilled labor is usually needed than in a job cost environment, where workers need to perform a greater variety of tasks because of the different types of jobs. Automation is found more often in process cost settings. Therefore, the proportion of overhead cost in the total product cost will generally be higher than for job cost settings.

Focal Point for Cost Accumulation In process cost systems, we identify materials, labor, and overhead costs with specific depart- ments or operating centers. This differs from job cost systems, which identify costs with spe- cific batches or customer orders. In this chapter, the term department will be used as a generic term and will cover the traditional concepts of department, operating or work center, opera- tion, task, activity center, and responsibility center. As a result of charging costs to depart- ments, few detailed records are needed with process costing.

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Section 3.2 Modified and Hybrid Systems

3.2 Modified and Hybrid Systems Classifying an accounting system as a job cost or process cost system is often not easy. This is especially true when companies have a wide variety of products and processes. Modifications and adaptations are made to the accounting system to meet the needs of specific situations. These result in systems we categorize as modified cost systems and hybrid cost systems.

A modified cost system has one or more elements of cost using job costing, while the other cost elements use process costing. For example, a manufacturer of shoes will make different sizes and styles and use different grades of leather. However, the operations of cutting and sewing the leather and attaching the heels and soles are essentially the same for each shoe. Consequently, the manufacturer can group the shoes by sizes, styles, and grades of leather, and treat the costing of materials using job costing. Then, the labor and factory overhead costs for the operations can use a process cost system.

Figure 3.1: Comparison of job costing and process costing

PRODUCT SIMILARITY

Job costing Process costing

TIMING

MATERIALS

LABOR

OVERHEAD

COST IDENTIFICATION

Products/jobs differ from one another

Products are all alike

Salesorders precede production

Production precedes sales; goods produced for anticipated sales

Unique materials for each product/job

Standard materials for all products

Variety of tasks are preformed due to different types of products/jobs

Production tasks are routine due to similarity of products

Relatively low degree of automation, so overhead costs are generally not a high portion of total cost

Often highly automated production, so overhead costs are generally a high portion of total cost

Costs indentified with specific batches or customer orders

Costs identified with departments or operating centers

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Section 3.4 The Cost Elements in a Process Cost System

A hybrid cost system exists where one type of cost system (job costing or process costing) is used for one phase of the production process, and another system is used for a subsequent phase. For example, in manufacturing cars, the various parts, subassemblies, engines, trans- missions, and so forth may be produced where a job cost system is used. In assembly, every car, regardless of model, has the same assembly operations performed. Therefore, the labor and factory overhead costs of the assembly operations may be accounted for using a process cost system. Hybrid cost systems can involve various sequences of job and process costing, depending on the particular production process.

Operation costing is a term often used to refer to modified or hybrid cost systems. Except in the simplest of cases, pure job costing or process costing does not exist. There is usually some modification. Managers need to understand their own organization’s cost system in order to evaluate the cost information generated by that system. The remainder of this chapter pro- vides detailed discussions of job cost and process cost systems.

3.3 The Job Cost System The job cost system accumulates separately the costs of materials, labor, and overhead for each job, whether a job of one unit or a job of many units. Every job is assigned a number, which is used for accumulating the costs of that job. Daily, weekly, or monthly cost summaries for each job are generated. These summaries are referred to as job, work, or production orders. The file of production orders in process constitutes a subsidiary ledger in support of the work in process account in the general ledger.

Whereas a job cost system accumulates costs by jobs, a process cost system accumulates costs by departments. This, and other differences, changes the approach to determining unit costs in a process cost environment. However, as outlined in the remaining sections of this chapter, many of the product cost concepts of Chapter 2 apply as well to process costing.

3.4 The Cost Elements in a Process Cost System The cost elements in a process cost system depend on whether the organization is a manufac- turing or service organization. A manufacturer typically has more detailed costs; therefore, we focus on manufacturing firms in the following sections. We will discuss the two major ele- ments of manufacturing costs in a process cost system: materials and conversion costs.

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Section 3.4 The Cost Elements in a Process Cost System

Materials Materials are requisitioned for use in a specific department, and the materials costs are accu- mulated by the department for a specific time period. Although materials can be added in any department, they are often issued from the storeroom to the first operating department in the process. The concept of accounting for materials costs does not depend on whether materi- als are added in the first department or in subsequent departments. Distinguishing between direct materials and indirect materials is not considered critical to obtain accurate unit costs.

Two major differences in accumulating materials costs between the job cost system and the process cost system should be noted. Materials costs are identified first with departments and then assigned to individual units in a process cost system. Materials costs bypass depart- ments and are charged directly to specific jobs in a job cost system. In process costing, materi- als costs are accumulated for a period of time and averaged over all units receiving materials during the period. This averaging of costs is broader in a process cost system than in a job cost system, where costs would be averaged only over the batch of units comprising a particular job.

Conversion Costs Labor and overhead costs are incurred to convert materials into a finished product; hence, labor and overhead costs are called conversion costs. Because labor and overhead often enter the process at the same time, we combine them for illustrations throughout the chapter. This assumes that overhead is applied to production using direct labor hours or dollars. Where another cost driver is used, we separate the two cost elements.

Labor cost is measured monthly, by department, and without identifying specific orders. Labor time tickets may be used for payroll accounting, but are not needed to measure the time to complete a single order because each unit of product in a process cost setting is pre- sumed to take the same amount of time. Like materials, little emphasis is placed on distin- guishing precisely between direct labor and indirect labor.

Overhead costs are accumulated by department. Typically, we record them in a departmen- tal overhead control ledger by type of cost (e.g., depreciation, utilities). Overhead costs are charged to production through predetermined overhead rates for each department. In most of our illustrations, overhead appears to be actual overhead. However, the costs represent charges based on predetermined overhead rates under a normal cost system. Since normal costing was discussed in Chapter 2, we will not repeat the coverage here. We assume that overhead is accumulated and applied using departmental rates.

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Section 3.4 The Cost Elements in a Process Cost System

Cost Flows In a process system, a product may flow through several operations before completion. For example, production of cellular phones may start in a fabricating operation, as shown in Fig- ure 3.2.

Both the physical units and costs will be identified for the fabricating operation over a period of time, such as a month. When the inner components of the phones are completed in the fab- ricating operation, the units with their costs are transferred by automated guided vehicles to the next operation—in this case, the molding operation where the casings are formed. Addi- tional costs will be incurred and accounted for in the molding operation. At the completion of the molding operation, the units and accumulated costs of preceding operations will be transferred to the last operation in this example, the finishing operation.

Figure 3.2: Flow of units and costs in a process manufacturing system

Department B, Molding

Operation

Department C, Finishing Operation

Finished Goods Inventory

Cost of Goods Sold

Department A, Fabricating Operation

Start units. Add costs.

Transfer units and costs to Dept. B.

Add Dept. B costs.

Transfer units and costs to Dept. C.

Add Dept. C costs.

Transfer units and costs to Finished Goods Inventory.

Record the cost of goods sold.

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Section 3.4 The Cost Elements in a Process Cost System

Figure 3.3: Flow of units and costs for subassembly components

Department B, Molding

Operation

Department C, Finishing Operation

Finished Goods Inventory

Cost of Goods Sold

Department A, Fabricating Operation

Department X, Soldering Operation

Transfer units and costs to Dept. C.

Department W, Forming

Operation

Start units. Add costs.

Transfer units and costs to Dept. B.

Add Dept. B costs.

Start subassembly units and costs.

Transfer units and costs to Dept. X.

Add Dept. X costs.

Transfer units and costs to Dept. C.

Add Dept. C costs.

Transfer units and costs to Finished Goods Inventory.

Record the cost of goods sold.

Main Production Line Subassembly Production Line

Because costs need to be identified with departments, a process cost system normally involves accounting transfers between departmental work in process inventory accounts. Each depart- ment has its own work in process account; when goods are completed in one department, their costs are transferred to the work in process account of the next department.

In some types of operations, a subassembly may be produced on a separate production line for addition to the product at a later stage. For example, assume that the main production line for computer keyboards extends from Department A (Fabricating) to Department C (Fin- ishing). A subassembly line, consisting of Departments W (Forming) and X (Soldering), uses numerically controlled machines to produce a component that converts physical measures like velocity and pressure into digital form. These components are brought into the main line in Department C. A diagram showing the flow of units and costs for this example appears in Figure 3.3.

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Section 3.5 The Equivalent Unit Concept

3.5 The Equivalent Unit Concept A primary goal of any cost accounting system is to identify product costs for determining end- ing inventories of work in process and finished goods and for establishing the cost of goods sold amount. Costs are attached to units in inventories whether the units are wholly or par- tially completed. The mechanism for tracing costs to units is a unit cost.

Unit Costs When calculating unit costs, we typically think of a formula similar to the following:

Unit cost = Total costs

Units produced or work done

Applying this formula to the typical process cost situation is complicated by two major fac- tors: (1) the stage of completion of units in work in process inventories, and (2) the different points in time that materials and conversion costs enter a departmental process. We will dis- cuss point (2) in more detail later in the chapter.

The number of units completed is not a good measure for determining an appropriate unit cost when there are partially completed units in beginning or ending inventories. Conse- quently, an equivalent unit must be identified. Equivalent units represent the theoretical number of units that could have been produced had the resources been applied to units that were started and completed during the period. We can also think of equivalent units as rep- resenting the actual work done on the physical units. For instance, two physical units 50% complete represent the equivalent of one unit 100% complete.

Flow of Physical Units For each department, the flow of physical units can be viewed as follows:

Units in beginning work in process inventory + Units of product started during the period = Units completed and transferred out + Units in ending work in process inventory

This relationship among physical units is also shown in Figure 3.4. As diagrammed, the num- ber of units started and completed during the period can be computed two ways:

Units completed and transferred out – Units in beginning work in process inventory = Units started and completed

or

Units of product started during the period – Units in ending work in process inventory = Units started and completed

Knowing where all units are in a production process is an important starting point for cal- culating unit costs. Figure 3.4 represents the location and flow of physical units through a production process for a given time period.

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Section 3.5 The Equivalent Unit Concept

Stage of Completion In a process cost system, the units in the beginning and ending inventories are usually at different stages of completion. The stage of completion is the average percentage of work completed on a unit of product at any point in time. For a department, it is useful to identify three distinct groupings of products when computing equivalent units:

1. Partially completed units in the beginning inventory that are completed during the current period. The work to complete these units is represented by 100% less the stage of completion when the period started. We generally assume a first-in, first-out flow, which will be explained in more detail later in this chapter.

2. Units started and completed during the period. The work completed is represented by 100%.

3. Partially completed units at the end of the period. The work completed is represented by the percentage of completion at the end of the period.

When all three of these groups are summed, the result is equivalent units of output for this time period—the work done by the workers in this department. This is the number of units that could have been produced if all production were started and completed during the period, assuming no beginning or ending work in process inventories.

For example, the Norwich Post Office has a sorting department. On March 1, 15,000 units were in process and were 60% completed. During March, the department started work on 200,000 units. On March 31, 20,000 units were in process and were 30% completed. From our flow of physical units formula, we calculate the number of units completed as follows:

Figure 3.4: Relationship among physical units within a department

Units Completed and Transferred Out

Units in beginning

work in process

inventory

Units started and completed

during the period

Units in ending

work in process

inventory

Units Started During the Period

Units in beginning inventory 15,000

 + Units started during period 200,000

 − Units in ending inventory (20,000)

Units completed and transferred 195,000

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Section 3.5 The Equivalent Unit Concept

Next, we compute the units started and completed using both methods described previously:

Current period work to complete beginning inventory [15,000 × (100% − 60%)] 6,000

 + Units started and completed (180,000 units × 100%) 180,000

 + Current period work in ending inventory (20,000 units × 30%) 6,000

Equivalent units of output (work done during the period) 192,000

or

Units completed and transferred 195,000

 − Units in beginning inventory (15,000)

Units started and completed 180,000

Units started during period 200,000

 – Units in ending inventory (20,000)

Units started and completed 180,000

We now have the three groups of units and their stages of completion, which are necessary to find the number of equivalent units. The calculation for the equivalent units of output for the period is as follows:

Timing of Inputs Materials, labor, and overhead are the inputs to the production process. These inputs may enter at different points during the process. The most common situation is for materials to enter at the beginning of a departmental process and for labor and overhead to be added continuously throughout the process. Consequently, it is possible for some units in process to have all of their materials added but only part of the labor and overhead. In other processes, the materials may be added continuously or at the end of the process. For our purposes, unless otherwise stated, presume that materials are added at the beginning of the process, and labor and overhead enter the process together and are added continuously or evenly throughout the process.

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Section 3.5 The Equivalent Unit Concept

To calculate unit costs when inputs have different timing for entering a process, we need to calculate the equivalent units for each cost input. Therefore, one equivalent unit computa- tion is for materials; another computation is for conversion costs. The computational steps developed in the next section will show how separate equivalent units quantities are used to establish unit costs.

Computational Steps Tracing physical units to a department and accounting for those units are generally cleri- cal functions. Likewise, the identification of the costs charged to a department is a relatively simple function. However, distributing the costs to work completed and ending inventories requires an understanding of several steps. These steps are:

1. Determine flow of physical units. 2. Calculate equivalent units. 3. Compute unit costs. 4. Distribute total costs to units. 5. Reconcile the costs.

The last step checks whether the four previous steps were completed accurately. This step veri- fies that the total costs distributed to the units equal the total costs charged to the department. Each of these steps will be presented in detail as part of developing a cost of production report.

We assume a first-in, first-out (FIFO) cost method in progressing through the five compu- tational steps. The beginning inventory is completed before new units are completed. Costs incurred flow in the same manner. Most companies using process costing use the FIFO cost method. Another frequently used method, the weighted average cost method, is discussed later in this chapter.

Under FIFO, the older units and costs are transferred out first, and the more current units and costs are transferred out next. Only the most recent costs are held as ending inventory. With the FIFO cost method, the equivalent units of output are literally the units that could have been completed if all efforts during the period were devoted to starting and completing units, allowing no partially completed units. Usually, however, some units will be in a stage of partial completion at both the beginning and at the end of the month. The beginning work in process units are completed during the month, and a start has been made on the units in ending work in process.

To illustrate the computational steps, consider the current plant of Shirts Unlimited. Sweat- shirts are produced in three departments: Cutting, Sewing, and Finishing. Our illustration will focus on the Cutting Department. All cloth material enters production at the beginning of the Cutting Department operations. The cloth is cut there. Both materials and conversion costs are incurred in the Cutting Department. Its activity for May is summarized as follows:

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Section 3.5 The Equivalent Unit Concept

Step 1: Determine Flow of Physical Units. Determining the flow of physical units for a department involves identifying the units in the beginning inventory, the units started and completed during the period, and the units in the ending inventory. These are whole units; stage of completion is not an issue here. For the Cutting Department of Shirts Unlimited, we have:

Units in beginning work in process 4,000

Units started and completed: (12,000 – 2,000 or 14,000 – 4,000) 10,000

Units in ending work in process 2,000

Total units 16,000

Work in process, May 1:

 Units 4,000

Stage of completion:

 Materials 100%

 Conversion costs 40%

Costs:

 Materials $400,000

 Conversion costs 80,000

 Beginning inventory total cost $480,000

Units started 12,000

Units completed and transferred 14,000

Current period costs:

 Materials $1,200,000

 Conversion costs 650,000

 Total costs added $1,850,000

Work in process, May 31:

Units 2,000

Stage of completion:

 Materials 100%

 Conversion costs 30%

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Section 3.5 The Equivalent Unit Concept

Step 2: Calculate Equivalent Units. Equivalent units are computed by multiplying physical units by the percentage of work completed on them. For our example, using the units started and completed method, we have the following calculations:

Materials Conversion

Current period work to complete beginning inventory:

 4,000 × (100% − 100%) 0

 4,000 × (100% − 40%) 2,400

Units started and completed in May:

 10,000 × 100% 10,000 10,000

May’s work in ending inventory:

 2,000 × 100% 2,000

 2,000 × 30%       600

Equivalent units (work done during May) 12,000 13,000

Materials Conversion Total

Beginning inventory $400,000 $80,000 $480,000

May’s costs 1,200,000 650,000 1,850,000

Total costs $1,600,000 $730,000 $2,330,000

Note that in deriving the 2,400 equivalent units to complete the beginning inventory for con- version costs, we multiply the 4,000 physical units by 60% (100% – 40%) because the units were already 40% complete and another 60% of work is needed in the current period to complete those units.

Step 3: Compute Unit Costs. We begin this step by itemizing the costs for which the Cutting Department will be held accountable.

The unit costs for materials and conversion costs are calculated from the current month’s costs and equivalent units. Last month’s costs and equivalent units of work are included in the beginning inventory amount and will be treated separately. Using May’s costs and the equivalent units from above, the costs for May are divided by the equivalent units for May to obtain unit costs:

Unit Costs for May:

Unit cost for materials = $1,200,000 / 12,000 = $100

Unit cost for conversion = $650,000 / 13,000 = $50

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Section 3.5 The Equivalent Unit Concept

The beginning work in process cost provides useful information for managers. These dollars represent costs from the prior period—in this case, the previous month. Thus, unit cost infor- mation about the beginning inventory is obtained by dividing the beginning inventory costs by the prior period work (i.e., equivalent units) in the beginning inventory:

April’s Unit Costs in May’s Beginning Inventory:

Unit cost for materials = $400,000 / 4,000 = $100

Unit cost for conversion = $80,000 / 1,600 = $50

These unit costs are identical to those for the current period, although such a case will not occur very often.

Step 4: Distribute Total Costs to Units. We next show the distribution of costs to units using the unit costs and equivalent units derived earlier.

Costs Accounted for: Materials Conversion Total

Completed and transferred to Sewing:

Work in Process, May 1:

Prior period costs $400,000 $80,000 $480,000

May:

 Equivalent units 0 2,400

 Times costs per unit $100 $50

 Costs $0 $120,000 $120,000

Completed cost of beginning inventory $400,000 $200,000 $600,000

Started and Completed:

 Units 10,000 10,000

 Times cost per unit $100 $50

 Costs $1,000,000 $500,000 $1,500,000

Total cost of completed and transferred units $1,400,000 $700,000 $2,100,000

Work in Process, May 31:

 Equivalent units 2,000 600

 Times cost per unit $100 $50

 Costs $200,000 $30,000 $230,000

Total costs accounted for $1,600,000 $730,000 $2,330,000

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Section 3.6 Cost of Production Report

Note the sequence of computations. First, the old costs in the beginning work in process are listed. Then, we compute the cost to complete the beginning work in process in the current period. Next, we calculate the costs associated with units started and completed. The sum of all of these costs is the cost of goods completed and transferred out. This is also called the cost of goods manufactured. Finally, we determine the costs of the work done on the units still in process on May 31.

Often the unit cost calculations result in the need to round to some decimal place. The more decimal places used, the less the rounding error in total dollars assigned to units completed and units in ending inventory. If rounding errors occur, it is customary to adjust the costs assigned to units completed to compensate for the rounding error.

Step 5: Reconcile the Costs. This final step in the computational process is really a check to ensure that all department costs are charged to units completed and units in the ending inven- tory. As shown in Step 3, the total costs charged to the Cutting Department are $2,330,000. After distributing the costs to the units completed and units in the ending inventory, the sum should also equal $2,330,000. This is confirmed by the total costs accounted for in Step 4. This check shows that materials and conversion costs charged to the department have indeed been distributed to all units.

3.6 Cost of Production Report The five computational steps provide all of the calculations needed to prepare a cost of pro- duction report for May. This report, which presents information about units, costs charged to the department, and how the costs are accounted for, is shown in Figure 3.5.

In T-account form, the transactions reflected in the cost of production report would be sum- marized as shown in Figure 3.6.

We use the same procedures to determine costs for subsequent departments in the process- ing operation. In departments after the first, however, unit costs must be combined with the accumulated costs of work done in earlier departments. For example, if operations cover 10 departments, Department 10 would obtain a unit cost for the total work done in all preceding nine departments and calculate a unit cost for its own work.

Management’s Use of Cost of Production Reports Internal accounting reports often serve only to attach dollars to the events about which man- agers already know. For example, managers know about volumes, inefficiencies, and scrap, but they do not know the costs related to them. However, the information provided by a cost of production report can be used by managers in several different ways.

When unit costs for materials and conversion costs change from one period to the next, a manager should ask why. Why is a materials price higher or lower? What causes conversion costs to change? The manager has to find the answers to ensure that the numbers reported represent reality and are accurate. Sometimes managers intuitively know the numbers are either correct or incorrect because of their experiences.

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Section 3.6 Cost of Production Report

Physical

Units

4,000

Shirts Unlimited Cutting Department

Cost of Production Report for the Month of May

Materials Equivalent

Units

Conversion Equivalent

UnitsUnits:

Beginning work in process:

Prior Month

4,000 × 100%

4,000 × 40%

May’s work:

4,000 × (100% – 100%)

4,000 × (100% – 40%)

Units started and completed:

10,000 × 100%

Ending work in process

2,000 × 100%

2,000 × 30%

Total units

Equivalent units of output

10,000

2,000

16,000

$ 400,000

4,000

$ 100

$1,200,000

12,000

$ 100

$1,600,000

4,000

10,000

2,000

12,000

$ 80,000

1,600

$ 50

$650,000

13,000

$ 50

$730,000

1,600

10,000

600

13,000

$ 480,000

$1,850,000

$2,330,000

Materials Conversion Total Costs Charged to Department: