How we can prepare the production cost report?

The cost incurred for the period as well as all units produce during the period accumulated on production cost report that accounts for the physical flow of units. The report includes the beginning inventory, the number of the units started this period, the number of units completed this period and the number of units remaining in inventory at the end of the period.

  First of all we should compute the equivalent unites for the period. Direct material and conversion cost (direct labor plus factory overhead cost)’s equivalent units. It is equal to the amount of direct material and conversion cost necessary to complete one unit of production.

  We have two ways to prepare production cost report the first in first out method and the weighted average method. Under the first in first out method the equivalent units equal the completion of units on hand at the beginning of the period plus units started and completed during the period plus unit partially complete at the end of the period. The cost of the equivalent unit equal the current cost only divided by the equivalent units for the period. Under the weighted average method the equivalent units equal units completed during the period regardless of when the work was done pulse units partially complete at the end of the period. The cost of the equivalent unit equal the cost of the beginning inventory pulse the current cost of the period divided by the weighted average equivalent units.

             In the end of the report we should determined the period equivalent units, the total cost of the period and each equivalent unit cost.