Production cost report

Definition

A production cost report summarizes the total costs incurred by a processing department and calculates the cost per unit for products during a specific period. It is essential for managing and controlling production costs in process costing systems.

5 Must Know Facts For Your Next Test

1. A production cost report includes information on both direct materials and conversion costs.
2. It uses equivalent units to allocate costs accurately between completed units and work in progress.
3. The report helps identify any discrepancies or inefficiencies in the production process.
4. It serves as a key document for financial reporting and internal decision-making.
5. Production cost reports are typically prepared for each processing department within a manufacturing company.

Review Questions

• What are the two main components of costs included in a production cost report?
• How does a production cost report use equivalent units?
• Why is a production cost report important for internal decision-making?

Related terms

Equivalent Units: Measures the amount of work done during a period, expressed in fully completed units.

Conversion Costs: Includes labor and overhead costs incurred to convert raw materials into finished goods.

Process Costing: A costing method used where similar items are produced continuously, assigning costs equally across all units.