Question

Question: What are the four steps in preparing a production cost report?

Short answer

Answer:

. The four steps procedure to prepare the production cost report includes:

1. Summarize the flow of physical units

2. Compute output in terms of equivalent units of production

3. Compute the cost per equivalent unit of production

4. Assign cost to units completed and units in process.

Step-by-step solution

Summarize the flow of physical units

The flow of physical units is classified as the First-in-first-out, last-in-first-out or weighted average. The company is required to summarize the flow of physical unit while determining the costing of material used in production.

Compute the output in terms of equivalent unit of production

The company should calculate the number of unit produced at the end of the manufacturing process to determine the per unit cost incurred by the company.

Compute the cost per equivalent unit of production

The cost per equivalent unit of production is identified by the management to decide over the selling price and the profit margin of the company.

Assign cost to units completed and units in process

Once the cost per unit is identified, the company assign this cost to the finished goods units and the work in process units.