As you must know, a cost of production report has two sections:
(a) Quantity Schedule; and,
(b) Cost Schedule
(a) Quantity schedule shows the quantity to be accounted for comprising beginning inventory and units started/transferred from previous process. Then this schedule further explains how much of the units were transferred out and the balance is the ending units in process. This is the simplest form. There can be other items such as normal and abnormal losses, units added, etc. You need not worry about this in the present problem.
(b) The Cost schedule also has two parts: Costs to be accounted for and the accounting treatment of these costs.
Now you need to compute the equivalent production units. This depends mainly on the method of valuation used such as FIFO or Weighted Average. The EPU is slightly different in both the cases.
I you are using FIFO method, the follow the following procedure:
Units transferred out xxxx
Less: Opening WIP (xxx)
Units started and completed this period xxxx
Work done on beginning inventory xxx
Work done on ending inventory xxx
Equivalent production units xxxx
Since the beginning units are partly completed in the previous period, work done in the current period will be to complete the unfinished work, in your case 2/5
You will use these EPU for computing unit costs by dividing current costs with EPU
If you are using Weighted average method:
Units transferred out xxxx
Ending WIP units xxx
Equivalent Units xxxx
Unit costs will be computed by adding the value of each item of costs in the beginning inventory to the current cost of each element and dividing by the EPU.
I hope this will help you get started. Try it out and if there is any problem, we will try to help you out.
|