Cost of Production Report (CPR):
Definition and Explanation of Cost of Production Report (CPR):
A departmental cost of
production report (CPR) shows all costs chargeable to a
department. It 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:
- Total unit costs transferred to it
from a preceding department.
- Materials, labor, and factory
overhead added by the department.
- Unit cost added by the department.
- Total and unit costs accumulated to
the end of operations in the department.
- The cost of the beginning and ending
work in process inventories.
- 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: one showing costs for which the department is
accountable, including departmental and cumulative total and unit costs, the
other showing the disposition of these costs. A quantity schedule showing
the total number of units for which a department is accountable and the
disposition made of these units is also part of each department's cost of
production report. Information in this schedule, adjusted for equivalent
production is used to determine the unit costs added by a department, the
costing of the ending 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 shows only the unit cost for the period would not
be satisfactory for controlling costs. Total figures mean very little; cost
control requires detailed data. Therefore, in most instances, the total cost
is broken down by cost elements for each department head responsible for the
costs incurred. Furthermore, detailed departmental figures are needed
because of the various completion stages of the work in process inventories.
Either in the cost of production report
itself or in the supporting schedules, each item of material used by
a department is listed; every labor operation is shown separately;
factory overhead components are noted individually; and a unit cost
is derived for each item. To condense the illustrated cost of
production reports, only total materials, labor, and factory
overhead charged to departments are considered; and unit costs are
computed only for each cost element rather than for each item.
Example:
The reports of The Clonex
Corporation, which manufactures one product in three producing
departments (Blending, Testing, and Terminal), are used to
illustrate the details involved in the preparation of cost of
production reports. Click on a link to see the report of blending,
testing or terminal department.
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