Question: The results of the four vital steps are typically presented in a production price report. The production cost reportA report the summarizes the production and also cost activity within a department because that a reporting period.

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summarizes the production and also cost activity within a department because that a report period. It is just a formal summary of the 4 steps performed come assign expenses to units transferred out and units in ending work-in-process (WIP) inventory. What go the production price report look choose for the Assembly department at workdesk Products, Inc.?

 

Answer: The production cost report because that the month of might for the Assembly department shows up in number 4.9 \"Production expense Report for desk Products’ Assembly Department\". An alert that each section of this report corresponds with one of the 4 steps explained earlier. We carry out references to the complying with illustrations so you have the right to review the information supporting calculations.


Figure 4.9 Production cost Report for desk Products’ Assembly Department

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a Total expenses to be accounted for (step 2) need to equal complete costs accounted for (step 4).

b Data space given.

c This section comes from Figure 4.4 \"Flow the Units and also Equivalent Unit Calculations for workdesk Products’ Assembly Department\".

d This section originates from Figure 4.5 \"Summary of expenses to be Accounted because that in desk Products’ Assembly Department\".

e This section originates from Figure 4.6 \"Calculation of the price per indistinguishable Unit for desk Products’ Assembly Department\".

f This section comes from Figure 4.7 \"Assigning costs to products in workdesk Products’ Assembly Department\".


How Do managers Use Production expense Report Information?

Question: back the production price report offers information needed to transfer costs from one account to another, managers likewise use this report for decision-making purposes. What important questions deserve to be answered using the production expense report?

 

Answer: A production expense report helps supervisors answer several necessary questions:

just how much go it price to develop each unit that product because that each department? i m sorry production cost is the highest—direct materials, straight labor, or overhead? Where are we having challenges in the production process? In any particular departments? space we seeing any significant changes in unit costs for direct materials, straight labor, or overhead? If so, why? How plenty of units flow through each handling department each month? Are improvements in the production procedure being reflect in the cost per unit indigenous one month come the next?

Beware of fixed Costs

Question: Why can the every unit expense data detailed in the production expense report it is in misleading?

 

Answer: when using details from the production cost report, managers must be mindful not come assume the all production costs are variable costs. The CEO of desk Products, Inc., Ann Watkins, to be told that the Assembly department expense for each desk totaled $62 because that the month of might (from figure 4.9 \"Production expense Report for desk Products’ Assembly Department\", step 3). However, if the agency produces much more or fewer systems than were created in May, the unit expense will change. This is due to the fact that the $62 unit cost includes both variable and also fixed costs (see chapter 5 \"How carry out Organizations identify Cost actions Patterns?\" for a thorough discussion of fixed and variable costs).

Assume direct materials and also direct labor space variable costs. In the Assembly department, the variable expenses per unit linked with straight materials and also direct job of $50 (= $30 straight materials + $20 straight labor) will stay the same regardless that the level the production, in ~ the pertinent range. However, the staying unit product cost of $12 connected with overhead need to be analyzed more to determine the amount that is change (e.g., indirect materials) and the amount that is solved (e.g., manufacturing facility rent). Supervisors must understand that fixed costs per unit will adjust depending ~ above the level the production. Much more specifically, Ann Watkins must recognize that the $62 unit cost in the Assembly department detailed in the production cost report will adjust depending top top the level the production. Chapter 5 \"How execute Organizations recognize Cost behavior Patterns?\" provides a in-depth presentation the how price information can be separated right into fixed and also variable materials for the objective of giving managers with more useful information.


Key Takeaway

The four vital steps of assigning costs to units moved out and units in finishing WIP inventory room formally gift in a production expense report. The production price report summarizes the production and also cost task within a handling department because that a reporting period. A separate report is all set for each processing department. Rounding the price per equivalent unit come the nearest thousandth will minimize rounding differences when reconciling costs to be accounted because that in step 2 with prices accounted because that in step 4.

Computer Application

Using Excel come Prepare a Production cost Report

Managers commonly use computer system software come prepare production cost reports. They do so for numerous reasons:

when the layout is established, the template have the right to be supplied from one duration to the next. Formulas underlie every calculations, thereby minimizing the potential for mathematics errors and increasing the process. Changes can it is in made easily without having to redo the whole report. Reports can be easily merged to administer a side-by-side analysis from one duration to the next.

Review figure 4.9 \"Production expense Report for desk Products’ Assembly Department\" and then ask yourself: “How have the right to I usage Excel to aid prepare this report?” answers will vary widely relying on your endure with Excel. However, Excel has actually a few basic features that have the right to make the project of creating a production expense report easier. For example, you deserve to use recipe to amount numbers in a shaft (note the each of the four steps presented in figure 4.9 \"Production price Report for workdesk Products’ Assembly Department\" has column totals) and also to calculate the price per identical unit. Additionally you can create a different line to double-check that

the units to be accounting for enhance the units accounting for; and the total costs to be accounted for enhance the total prices accounted for.

For those who desire to include more facility features, the basic data (e.g., the data in Table 4.2 \"Production information for desk Products’ Assembly Department\") deserve to be gone into at the height of the spreadsheet and pulled under to the production expense report wherein necessary.

An instance of just how to use Excel to prepare a production price report follows. Notification that the simple data space at the peak of the spreadsheet, and also the rest of the report is moved by formulas. Each month, the data at the optimal are changed to reflect the current month’s activity, and also the production cost report takes care of itself.


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Review problem 4.5

Using the information in note 4.24 \"Review problem 4.4\", prepare a production cost report for the mix department of Kelley Paint company for the month finished March 31. (Hint: girlfriend have already completed the four key steps in keep in mind 4.24 \"Review trouble 4.4\". Simply summarize the information in a production cost report as shown in number 4.9 \"Production expense Report for workdesk Products’ Assembly Department\".)

Solution to Review difficulty 4.5

(See solutions to keep in mind 4.24 \"Review difficulty 4.4\" for comprehensive calculations.)


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End-of-Chapter Exercises

Questions

Which varieties of providers use a process costing system to account for product costs? carry out at least three examples of products that would call for the usage of a procedure costing system. Define the similarities between a process costing system and also a task costing system. Describe the differences in between a procedure costing system and also a project costing system. What are transferred-in costs? explain the difference between physical units and equivalent units. Describe the principle of indistinguishable units presume the load average technique is used. Describe why straight materials, direct labor, and also overhead could be at different stages of perfect at the end of a report period. explain the four vital steps presented in a production cost report suspect the weight average method is used. What 2 important quantities are figured out in step 4 of the production price report? explain the straightforward cost circulation equation and also explain just how it is supplied to reconcile units to be accounting for through units accounted for. Define the straightforward cost flow equation and explain how it is supplied to reconcile prices to it is in accounted for with costs accounted for. just how does a company determine the number of production expense reports to be ready for each reporting period? What is a production cost report, and also how is it used by management? define how the cost per equivalent unit could be misleading come managers, particularly when a far-reaching change in production is anticipated.

Brief Exercises

Product Costing at desk Products, Inc. refer to the dialogue presented in ~ the start of the chapter.

Required:

Why to be the owner of desk Products, Inc., concerned about the Assembly room product price of each desk? What walk the accountant, man Fuller, promise by the finish of the week?

Job Costing Versus procedure Costing. for each firm noted in the following, determine whether it would certainly use task costing or process costing.

Chewing gum manufacturer Custom automobile restorer Facial organization manufacturer accounting services provider electric services provider pool builder cereal producer Architectural design provider

Process Costing newspaper Entries. i think a agency has two handling departments—Molding and also Packaging. Transactions because that the month are displayed as follows.

The Molding department requisitioned direct materials totaling $2,000 come be used in production. Direct labor prices totaling $3,500 were occurs in the Molding department, to be paid the next month. Manufacturing overhead costs applied to commodities in the Molding department totaled $2,500. The cost of goods transferred native the Molding room to the Packaging room totaled $10,000. Manufacturing overhead costs applied to commodities in the Packaging room totaled $1,800.

Required:

Prepare journal entries to document transactions 1 v 5.

Calculating equivalent Units. complete the needs for every item in the following.

A university has actually 500 students enrolled in classes. Each college student attends school on a part-time basis. Top top average, each college student takes three-quarters that a complete load that classes. Calculate the number of full-time equivalent students (i.e., calculate the variety of equivalent units). A full of 10,000 systems of product remain in the Assembly room at the end of the year. Straight materials are 80 percent complete and also direct labor is 40 percent complete. Calculate the tantamount units in the Assembly room for straight materials and direct labor. A neighborhood hospital has actually 60 registered nurses working top top a part-time basis. On average, every nurse functions two-thirds of a full load. Calculation the variety of full-time identical nurses (i.e., calculate the variety of equivalent units). A total of 6,000 systems of product continue to be in the Quality trial and error department in ~ the finish of the year. Direct materials room 75 percent complete and also direct job is 20 percent complete. Calculation the tantamount units in the Quality trial and error department for straight materials and also direct labor.

Calculating price per equivalent Unit. The following information pertains to the Finishing department because that the month of June.


Direct Materials Direct Labor Overhead
Total expenses to be accounting for $100,000 $200,000 $300,000
Total indistinguishable units accounting for 10,000 units 8,000 units 8,000 units

Required:

Calculate the expense per indistinguishable unit for straight materials, straight labor, overhead, and in total. Display your calculations.

Assigning expenses to perfect Units and also to units in finishing WIP Inventory. The following information is for the paint department because that the month the January.


Direct Materials Direct Labor Overhead
Cost per identical unit $2.10 $1.50 $3.80
Equivalent devices completed and transferred out 3,000 units 3,000 units 3,000 units
Equivalent devices in finishing WIP inventory 1,000 units 1,200 units 1,200 units

Required:

calculation the expenses assigned to devices completed and also transferred out of the painting department for direct materials, direct labor, overhead, and in total. Calculation the costs assigned to finishing WIP inventory because that the paint department for straight materials, straight labor, overhead, and in total.

Exercises: collection A

Assigning expenses to Products: Weighted typical Method. Sydney, Inc., supplies the weight average an approach for its procedure costing system. The Assembly room at Sydney, Inc., began April with 6,000 units in work-in-process inventory, all of which to be completed and transferred out during April. Second 8,000 systems were started during the month, 3,000 the which were completed and also transferred out during April. A complete of 5,000 units continued to be in work-in-process inventory in ~ the finish of April and were at varying levels of completion, as shown in the following.


Direct materials 40 percent complete
Direct labor 30 percent complete
Overhead 50 percent complete

The following price information is for the Assembly room at Sydney, Inc., because that the month of April.


Direct Materials Direct Labor Overhead Total
Beginning WIP inventory $300,000 $350,000 $250,000 $900,000
Incurred throughout the month $180,000 $200,000 $170,000 $550,000

Required:

recognize the systems to be accounting for and units accounting for; then calculation the tantamount units for direct materials, straight labor, and overhead. (Hint: This calls for performing action 1 of the four-step process.) calculate the cost per tantamount unit for direct materials, straight labor, and also overhead. (Hint: This requires performing step 2 and also step 3 the the four-step process.) Assign prices to units transferred out and also to devices in finishing WIP inventory. (Hint: This requires performing step 4 the the four-step process.) confirm that full costs to it is in accounted for (from step 2) equals total costs accounted for (from step 4). Note that minor differences may occur due to rounding the expense per equivalent unit in step 3. Describe the an interpretation of equivalent units.

Process Costing newspaper Entries. Silva Piping firm produces PVC piping in two processing departments—Fabrication and also Packaging. Transactions because that the month that July are presented as follows.

direct materials totaling $15,000 are requisitioned and placed into production—$7,000 because that the Fabrication department and also $8,000 because that the Packaging department.

Direct labor costs (wages payable) space incurred by each department together follows:


Fabrication $4,500
Packaging $6,700

Manufacturing overhead prices are applied to each department as follows:


Fabrication $20,000
Packaging $14,000

assets with a cost of $22,000 room transferred native the Fabrication department to the Packaging department. Commodities with a cost of $35,000 room completed and also transferred native the Packaging room to the finished goods warehouse.

Products through a expense of $31,000 are offered to customers.

Required:

Prepare journal entries to document each that the ahead transactions. In general, just how does the process costing device used right here differ native a project costing system?

Exercises: collection B

Assigning expenses to Products: Weighted mean Method. Varian firm uses the load average an approach for its procedure costing system. The Molding department at Varian began the month that January with 80,000 devices in work-in-process inventory, all of which to be completed and also transferred out during January. Secondary 90,000 devices were started throughout the month, 30,000 the which to be completed and also transferred out during January. A complete of 60,000 units remained in work-in-process inventory in ~ the finish of January and also were at differing levels of completion, as displayed in the following.


Direct materials 80 percent complete
Direct labor 90 percent complete
Overhead 90 percent complete

The following price information is for the Molding room at Varian agency for the month of January.


Direct Materials Direct Labor Overhead Total
Beginning WIP inventory $1,400,000 $1,100,000 $1,700,000 $4,200,000
Incurred during the month $1,210,000 $ 980,000 $1,450,000 $3,640,000

Required:

recognize the systems to be accounting for and units accounted for; then calculation the indistinguishable units for direct materials, straight labor, and overhead. (Hint: This needs performing action 1 the the four-step process.) calculate the price per equivalent unit for straight materials, straight labor, and also overhead. (Hint: This requires performing step 2 and step 3 the the four-step process.) Assign expenses to units transferred out and to units in ending WIP inventory. (Hint: This calls for performing action 4 that the four-step process.) check that full costs to it is in accounted because that (from action 2) equals complete costs accounted for (from step 4). Keep in mind that minor differences may occur as result of rounding the cost per tantamount unit in step 3. Explain the definition of equivalent units.

Process Costing newspaper Entries. Westside chemistry produces repaint thinner in three handling departments—Mixing, Testing, and also Packaging. Transactions for the month the September are presented as follows.

direct materials totaling $80,000 are requisitioned and also placed right into production—$60,000 because that the mixing department, $11,000 for the trial and error department, and $9,000 for the Packaging department.

Direct labor costs (wages payable) occurs by each department are as follows:


Mixing $35,000
Testing $25,000
Packaging $18,000

Manufacturing overhead expenses are applied to every department as follows:


Mixing $17,500
Testing $12,500
Packaging $ 6,000

commodities with a cost of $55,000 room transferred native the mix department come the trial and error department. Commodities with a expense of $86,000 space transferred indigenous the experimentation department come the Packaging department. Commodities with a expense of $100,000 room completed and also transferred indigenous the Packaging room to the finished goods warehouse. Assets with a expense of $81,000 are marketed to customers.

Required:

Prepare journal entries to document each the the vault transactions. In general, just how does the procedure costing mechanism used here differ native a task costing system?

Problems

Production cost Report: Weighted mean Method. Calvin Chemical firm produces a chemical used in the manufacturing of silicon wafers. Calvin Chemical offers the weight average an approach for its procedure costing system. The mix department in ~ Calvin Chemical began the month the June v 5,000 systems (gallons) in work-in-process inventory, all of which were completed and also transferred out throughout June. An additional 15,000 units were started during the month, 11,000 of which to be completed and transferred out during June. A full of 4,000 units remained in work-in-process inventory at the finish of June and also were at varying levels of completion, as presented in the following.


Direct materials 60 percent complete
Direct labor 40 percent complete
Overhead 40 percent complete

The cost information is as follows:

 

Costs in beginning work-in-process inventory


Direct materials $8,000
Direct labor $3,000
Overhead $2,800

 

Costs incurred throughout the month


Direct materials $21,000
Direct labor $ 8,500
Overhead $ 7,200

Required:

Prepare a production price report for the mixing department at Calvin Chemical company for the month of June. Check that total costs to it is in accounted for (from action 2) equals total costs accounted for (from step 4). Keep in mind that minor distinctions may occur because of rounding the cost per identical unit in step 3. Follow to the production cost report, what is the complete cost per indistinguishable unit because that the work-related performed in the mix department? which of the 3 product cost components is the highest, and what percent that the complete does this product cost represent?

Production cost Report: Weighted mean Method. high quality Confections company manufactures coco bars in two processing departments, Mixing and also Packaging, and uses the load average technique for its process costing system. The table that adheres to shows info for the mix department because that the month that March.


Unit information (Measured in Pounds) Mixing
Beginning work-in-process inventory 8,000
Started or transferred in throughout the month 230,000
Ending work-in-process inventory: 80 percent materials, 70 percent labor, and 60 percent overhead 6,000
Cost Information
Beginning Work-in-Process Inventory
Direct materials $ 3,000
Direct labor $ 1,500
Overhead $ 2,200
Costs Incurred during the Period
Direct materials $103,000
Direct labor $ 55,000
Overhead $ 81,000

Required:

Prepare a production cost report for the mixing department because that the month of March. Confirm that full costs to be accounted because that (from action 2) equals full costs accounted because that (from action 4); minor distinctions may occur as result of rounding the expense per identical unit in step 3. Follow to the production cost report, what is the total cost per tantamount unit because that the work-related performed in the mixing department? i beg your pardon of the 3 product cost contents is the highest, and also what percent the the complete does this product expense represent?

Production price Report and Journal Entries: Weighted average Method. hardwood Products, Inc., manufactures plywood in two processing departments, Milling and Sanding, and also uses the weighted average an approach for its procedure costing system. The table that follows shows details for the Milling department because that the month of April.


Unit info (Measured in Feet) Milling
Beginning work-in-process inventory 24,000
Started or moved in throughout the month 110,000
Ending work-in-process inventory: 80 percent materials, 70 percent labor, and 60 percent overhead 32,000
Cost Information
Beginning Work-in-Process Inventory
Direct materials $ 9,000
Direct labor $ 3,000
Overhead $ 3,200
Costs Incurred throughout the Period
Direct materials $45,000
Direct labor $14,000
Overhead $16,000

Required:

Prepare a production cost report because that the Milling department for the month the April. Check that total costs to it is in accounted for (from action 2) equals full costs accounted because that (from action 4); minor differences may occur due to rounding the price per equivalent unit in action 3.

For the Milling room at wood Products, Inc., prepare newspaper entries to record:

The expense of direct materials inserted into production during the month (from action 2). Straight labor prices incurred during the month however not however paid (from step 2). The application of overhead costs during the month (from step 2). The carry of costs from the Milling department to the Sanding department (from step 4).

One action Further: Skill-Building Cases

Internet Project: Production company Plant Tour. making use of the Internet, find a company that offers a virtual tour that its production processes. Record your result by perfect the adhering to requirements.

Required:

summary each step in the manufacturing process. Which kind of costing system (job or process) would you expect the firm to use? Why?

Process Costing at Coca-Cola. to express to keep in mind 4.4 \"Business in activity 4.1\".

Required:

What kind of costing mechanism does Coca-Cola use? Explain. What is the function of prepare a production cost report? What info results from prepare a production price report for the mixing and also blending room at Coca-Cola? based on the info provided, what is the minimum number of production cost reports that Coca-Cola prepares each reporting period? Explain.

Process Costing at Wrigley. to express to note 4.9 \"Business in action 4.2\".

Required:

What form of costing device does Wrigley use? Explain. What is the function of preparing a production expense report? What details results from preparing a production price report for Wrigley’s Packaging department? based upon the details provided, what is the minimum variety of production cost reports the Wrigley prepares every reporting period? Explain.

Group Activity: job or process Costing? kind groups of 2 to four students. Each group should identify whether a procedure costing or task costing system is most likely used to calculate product costs for every item listed in the following and also should be all set to define its answers.

Jetliners developed by Boeing Gasoline created by Shell Oil Company Audit of Intel by Ernst & Young Oreo cookies produced by Nabisco Brands, Inc. Frosted Mini-Wheats developed by Kellogg Co. building and construction of suspension leg in Puget Sound, Washington, through Bechtel Group, Inc. Aluminum foil produced by Alcoa, Inc. Potato chips developed by Frito-Lay, Inc.

Comprehensive Cases

Ethics: Manipulating percent of completion Estimates. computer system Tech copy, group produces computer keyboards, and also its budget year end on December 31. The weighted average method is provided for the company’s procedure costing system. As the controller of computer Tech, you present December’s production cost report for the Assembly room to the president of the company. The Assembly department is the last handling department prior to goods space transferred come finished products inventory. All 160,000 devices completed and also transferred out throughout the month were sold by December 31.

The plank of directors at computer Tech created a compensation incentive setup that contains a considerable bonus because that the president of the firm if annual net income before taxes exceeds $2,000,000. Preliminary numbers show present year network income prior to taxes totaling $1,970,000, which is brief of the target through $30,000. The president viewpoints you and also asks friend to rise the percentage of completion for the 40,000 devices in finishing WIP inventory come 90 percent for straight materials and to 95 percent for straight labor and also overhead. Even though you room confident in the percentages used to prepare the production price report, which appears as follows, the chairman insists the his change is minor and also will have little impact on exactly how investors and creditors view the company.


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Required:

Why is the president questioning you to boost the percent of perfect estimates? Prepare an additional production cost report for computer system Tech firm that has the president’s revisions. Indicate what impact the president’s inquiry will have actually on cost of items sold and also on net earnings (ignore income taxes in her calculations).

Ethics: boosting Production to an increase Profits. Pacific Siding, Inc., produces man-made wood siding used in the building and construction of residential and also commercial buildings. Pacific Siding’s fiscal year ends on march 31, and the weight average method is offered for the company’s procedure costing system.

Financial outcomes for the first 11 month of the present fiscal year (through February 28) room well listed below expectations that management, owners, and creditors. Halfway with the month the March, the chief executive, management officer and also chief gaue won officer asked the controller to calculation the production results because that the month of march in the form of a production expense report (the firm only has one production department). This report is shown as follows.


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Armed with the preliminary production cost report for March, and also knowing the the company’s manufacturing is well listed below capacity, the CEO and CFO decision to create as numerous units as possible for the last fifty percent of March even though sales room not supposed to increase any kind of time soon. The production manager is called to press his employees to acquire as much as feasible with production, thereby boosting the percentage of completion for finishing WIP inventory. However, due to the fact that the production process takes 3 weeks to complete, all the units produced in the last half of March will be in WIP inventory in ~ the finish of March.

See more: Bitconnect Compound Interest Spreadsheet, Compound Interest Spreadsheet Bitconnect

Required:

define how the CEO and also CFO suppose to boost profit (net income) for the year by an enhancing production in ~ the end of March.

Using the following assumptions, prepare a revised estimate of manufacturing results in the type of a production cost report for the month the March.

Assumptions based on the CEO and CFO’s inquiry to rise production

systems started and also partially completed throughout the period will rise to 225,000 (from the initial calculation of 70,000). This is the projected finishing WIP inventory in ~ March 31. Percentage of completion approximates for systems in ending WIP inventory will increase to 80 percent for straight materials, 85 percent for straight labor, and also 90 percent for overhead. Expenses incurred throughout the period will rise to $95,000 for straight materials, $102,000 for direct labor, and $150,000 because that overhead (most overhead expenses are fixed). All units completed and transferred out during March are offered by march 31. compare your new production cost report v the one all set by the controller. How much do you mean profit to boost as a an outcome of enhancing production during the last half of March? (Ignore earnings taxes in her calculations.) Is the inquiry made through the CEO and CFO ethical? explain your answer.