Process Costing 5

V. Cost of Production Report

The purpose is to summarize all the periodic activity in a department's work in process account. The report can utilize FIFO or the weighted-average technique in calculating the equivalent units of production.

Example: A firm produces a product which requires processing through three departments: grinding, mixing and cooking. Data for the grinding department during a recent period follow: (000 omitted)

Units:
Work in process, beginning inventory: 5
Work in process, ending inventory: 4
Started during the period: 80
Shipped out during the period: 81


Costs:
Work in process, beginning inventory: $7.60
Material X $4.80
Material Y 0.00
Conversion cost 2.80
Added during period:
Material X $60.00
Material Y $25.50
Conversion $36.90

Material X is added at beginning of work in the department. Material Y is added when the goods are 60% complete as to conversion. Conversion costs are added uniformly during work in the department. The beginning work in process inventory is 40% complete as to conversion and the ending work in process inventory is 75% complete.

Further reading:
Process Costing 1