Question 1

The MST Manufacturing Company produces one product that passes through a single process in a manufacturing cycle lasting approximately 18 days. Therefore, there will generally be some work-in-process inventories at the end of each month.

After MST started its manufacturing operations on 1 January, the costs of production for the rest of the month are given as follows:


Materials $41,412
Labor $32,054
Factory Overhead $24,552

The production statistics for the month were:

Units completed and transferred to finished goods store 6,500
Units in process (materials 40% and labor and overhead 25%) 1,600

Required: Prepare a statement showing the equivalent production quantity for the month in terms of materials, labor, and factory overhead. Also, prepare a cost of production report.



MTS Manufacturing Company
Cost of Production Report
For the month of January 20xx

Cost of Production Report for MST Manufacturing Company

Equivalent Production Quantity Formula

Question No. 2

The Tuttni Corporation manufactures one product that passes through two manufacturing departments. Production and manufacturing costs for the month of April were as follows:

Production and Manufacturing Costs at Tuttni Corporation
Using the process costing system, prepare a cost of production report for the month.


Tuttni Corporation
Cost of Production Report
For the Month of April 20xx

Cost of Production Report for Tuttni Corporation
Cost Accounted for at Departments A and B
W.I.P ending inventory:

Application of Formula for Tuttni Corporation Cost of Production Report


Equivalent/Effective production

Department I

Materials = 9,400 + 600 x 50/100 = 9,700 units
Labor = 9,400 + 600 x 50/100 = 9,700 units
FOH = 9,400 + 600 x 50/100 = 9,700 units

Department II

Materials = 9,400 + 0 = 9,400 units
Labor = 9,400 + 0 = 9,400 units
FOH = 9,400 + 0 = 9,400 units

Frequently Asked Questions

What are the main differences between Process Costing and job-order costing?

Process Costing always follows the same process while job-order costing applies to each job separately.

What are the main reasons of using a job-order costing system?

Job-order costing is used when there is production of a variety of products or for one time jobs. This system records costs at the time they are incurred and it is easier to have control over the job.

What are some accounting implications of Process Costing?

The cost of ending inventory in a Process Costing system is equal to the sum of all costs for units transferred out plus labor and factory overhead costs, less any materials that were released but not yet used in production. The cost of goods sold is the sum of all costs for units started and completed during the period.

What is a work-in-process inventory?

A work-in-process inventory (wip) is an account that represents the cost of partially completed products. In Process Costing, the wip inventory accumulates the costs of all units that were started and completed during the period, but had not been transferred out of the department as of the end of the accounting period.

Can we use Process Costing system for one product producing?

Yes, it can be used if there is only single product. However it is recommended to use job order costing for more than one product.

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