COST OF PRODUCTION

REPORT
FIFO METHOD
First In, First Out Costing
Under the first in, first out (FIFO) method, the units in the beginning work in
process inventory are presented separately from the units started in the current
month.
• The units in process at the beginning are assumed to have been completed
first.
• The work done on the beginning WIP last month is kept separate from the
work done during the current month.
• Two equivalent units of production for completed units are computed, (1)
units in process beginning completed this month and (2) units started in
process completed this month.
• Costs incurred in the current month and units produced in the current month
are used to compute equivalent unit cost.
This method is discussed in detail in Chapter 12.
Advantages of using FIFO method

1. The unit costs are more accurate because they relate more directly to the units in the
beginning inventory and the units started and completed during the period.

2. The unit costs reflect current conditions more clearly, because the cost of completed
units that were in process at the beginning of the period and the cost of started
during the period are computed separately.

3. Major changes in cost can be monitored easily for control purposes.

APPLICATION
 the costs of the beginning work in process inventory are kept separate and assigned
only to the units in the beginning work in process.

 Costs incurred during the current month are considered to be used first to complete
the beginning work in process inventory and are added to the beginning costs
balance.

 Units that were in the beginning work in process inventory are presented separately
from the units that are started and completed in the current month in Section (d)
Costs Accounted For on the cost of production report.

 The units transferred out to the department during the month are composed of first
the beginning work in process and the units started and finished in the current
month.
COMPREHENSIVE ILLUSTRATION
Star Paper Company
CUTTING DEPARTMENT

COST DATA

Beginning Work in Process:

Materials 22,560.00
Labor 13,536.00
Overhead 28,952.00
Balance January 31 65,048.00

Current Month Costs

Materials 69,944.00
Labor 82,416.00
Overhead 133,886.00
Total February costs 286,246.00

Balance, February 28 351,294.00

CUTTING DEPARTMENT
PRODUCTION DATA

CUTTING DEPARTMENT
Monthly Production Report-FIFO Method
February 2018

Quantity
Work in Process- Beginning 3,760
Started in Process 11,160
Transferred Out to Next Department
From Work in Process - beginning 3,760
Started and Completed - Current Month 5,840
Total Transferred out to Next Department 9,600
Work in Process-ending 5,320

Stage of Completion of Work in Process Beginning Ending

Materials 100% 100%
Labor 40% 40%
Overhead 55% 55%
CUTTING DEPARTMENT
EQUIVALENT UNITS OF PRODUCTION

CUTTING DEPARTMENT
Equivalent Production Computations - FIFO
Month of February 2018

Materials
Transferred Out to Next Department
Completion of beginning WIP (3,760 x 0%) -
Started and Completed 5,840
Work in Process-End (5,320 x 100%) 5,320
Equivalent Units for Materials 11,160

Labor
Transferred Out to Next Department
Completion of beginning WIP (3,760 x 60%) 2,256
Started and Completed 5,840
Work in Process-End (5,320 x 40%) 2,128
Equivalent Units for Labor 10,224

Overhead
Transferred Out to Next Department
Completion of beginning WIP (3,760 x 45%) 1,692
Started and Completed 5,840
Work in Process-End (5,320 x 55%) 2,926
Equivalent Units for Overhead 10,458
CUTTING DEPARTMENT

QUANTITY SCHEDULE

COST OF PRODUCTION REPORT

CUTTING DEPARTMENT
Cost of Production Report
Month of February 2018

QUANTITY SCHEDULE Units

(a) Quantity to Be Accounted For:
Work in Process-Beginning 3,760
Started - Current Month 11,160
Total to be accounted for 14,920
(b) Quantity Accounted For:
Transferred Out to Next Department
From beginning WIP 3,760
Started and Completed 5,840 9,600
Work in Process-Ending 5,320
Total Accounted for 14,920
CUTTING DEPARTMENT
COST SCHEDULE
COST SCHEDULE Total Cost Equivalent Units Unit Costs
(c) Costs to Be Accounted For:
Work in Process - beginning 65,048
Costs Incurred in Current Month
Costs Incurred in this Dept.
Materials 69,944 / 11,160 = 6.26738
Labor 82,416 / 10,224 = 8.06103
Overhead 133,886 / 10,458 = 12.80226
Total Costs in this Dept. 286,246 27.13067
Total Costs to be Accounted For 351,294 /

(d) Cost Accounted For:

Transferred Out to Next Department
From Beginning WIP inventory 65,048
Current Month Costs
Materials - = - x 6.26738
Labor 18,186 = 2,256 x 8.06103
Overhead 21,661 = 1,692 x 12.80226
Costs of Completed Beg. WIP 104,895 / 3,760 = 27.89761
Started and Completed 158,443 = 5,840 x 27.13067
Total Costs of Transferred Out 263,338 / 9,600 = 27.89761

Work in Process - Ending

Costs in this Department
Materials 33,343 = 5,320 x 6.26738
Labor 17,154 = 2,128 x 8.06103
Overhead 37,459 = 2,926 x 12.80226
Total 87,956
Total Costs Accounted For 351,294
ASSEMBLY DEPARTMENT
COST DATA

Beginning Work in Process

Costs Transferred in From Prior Department 28,130.00
Costs Incurred in this Department
Materials 1,455.00
Labor 5,529.00
Overhead 4,656.00
Balance, January 31 39,770.00

Current Month
Costs Transferred in From Prior Department 263,338.00
Costs Incurred in this Department
Materials 23,128.00
Labor 70,638.00
Overhead 74,735.00 431,839.00
Balance, February 28 471,609.00
ASSEMBLY DEPARTMENT
PRODUCTION DATA

ASSEMBLY DEPARTMENT
Monthly Production Report-FIFO Method
February 2018

Quantity
Work in Process- Beginning 970
Started in Process-Current Month 9,600
Transferred Out to Next Department
From Work in Process - beginning 970
Started and Completed - Current Month 8,500
Total Transferred out to Next Department 9,470
Work in Process-ending 1,100

Stage of Completion Beginning Ending

Transferred In Cost 100% 100%
Materials 60% 55%
Labor 60% 55%
Overhead 60% 55%
ASSEMBLY DEPARTMENT
EQUIVALENT UNITS OF PRODUCTION

ASSEMBLY DEPARTMENT
Equivalent Production Computations - FIFO
Month of February 2018

Transferred In Cost From Prior Department

Transferred Out to Next Department
Completion of beginning WIP (970 x 0%) -
Started and Completed 8,500
Work in Process-End (1,100 x 100%) 1,100
Equivalent Units for Transferred In Costs 9,600
Materials
Transferred Out to Next Department
Completion of beginning WIP (970 x 40%) 388
Started and Completed 8,500
Work in Process-End (1,100 x 55%) 605
Equivalent Units for Materials 9,493

Labor
Transferred Out to Next Department
Completion of beginning WIP (970 x 40%) 388
Started and Completed 8,500
Work in Process-End (1,100 x 55%) 605
Equivalent Units for Labor 9,493

Overhead
Transferred Out to Next Department
Completion of beginning WIP (970 x 40%) 388
Started and Completed 8,500
Work in Process-End (1,100 x 55%) 605
Equivalent Units for Overhead 9,493
ASSEMBLY DEPARTMENT

COST OF PRODUCTION REPORT

ASSEMBLY DEPARTMENT
Cost of Production Report
Month of February 2018

QUANTITY SCHEDULE Units

(a) Quantity to Be Accounted For:
Work in Process-Beginning 970
Started in Process - Current Month 9,600
Total to be accounted for 10,570
(b) Quantity Accounted For:
Transferred Out to Next Department
From beginning WIP 970
Started and Completed 8,500 9,470
Work in Process-Ending 1,100
Total Accounted for 10,570
ASSEMBLY DEPARTMENT
COST SCHEDULE Total Cost Equivalent Units Unit Costs
(c) Costs to Be Accounted For:
Work in Process - beginning 39,770
Costs Incurred in Current Month
Trans-In Costs fr. Prior Department 263,338 / 9,600 = 27.43104
Costs Incurred in this Dept.
Materials 23,128 / 9,493 = 2.43632
Labor 70,638 / 9,493 = 7.44106
Overhead 74,735 / 9,493 = 7.87264
Total Costs in this Dept. 168,501 17.75003
Total Costs this Month 431,839 45.18107
Total Costs to be Accounted For 471,609

(d) Cost Accounted For:

Transferred Out to Next Department
From Beginning WIP inventory 39,770
Current Month Costs
Materials 945 = 388 x 2.43632
Labor 2,887 = 388 x 7.44106
Overhead 3,055 = 388 x 7.87264
Costs of Completed Beg. WIP 46,657 / 970 = 48.10
Started and Completed 384,039 = 8,500 x 45.18107
Total Costs of Transferred Out 430,696 / 9,470 = 45.48005

Work in Process - Ending

Trans.-In Costs Fr. Prior Dept. 30,174 = 1,100 x 27.43104
Costs in this Department
Materials 1,474 = 605 x 2.43632
Labor 4,502 = 605 x 7.44106
Overhead 4,763 = 605 x 7.87264
Total 40,913
Total Costs Accounted For 471,609
PACKAGING DEPARTMENT
COST DATA

Beginning Work in Process

Costs Transferred in From Prior Department 133,280.00
Costs Incurred in this Department
Materials -
Labor 2,230.00
Overhead 1,020.00
Balance, January 31 136,530.00

Costs this Month

Costs Transferred in From Prior Department 430,699.00
Costs Incurred in this Department
Materials 2,560.00
Labor 20,480.00
Overhead 16,885.00
Total Costs this Month 470,624.00
Balance, February 28 136,530.00
PACKAGING DEPARTMENT

MONTHLY PRODUCTION REPORT

PACKAGING DEPARTMENT
Monthly Production Report-FIFO Method
February 2018

Quantity
Work in Process- Beginning 2,720
Started in Production/Transferred In 9,470
Transferred Out to Finished Goods
From Work in Process - beginning 2,720
Started and Completed - Current Month 3,650 6,370
Work in Process-ending 5,820

Stage of Completion of Work in Process Beginning Ending

Transferred In Cost In Cost 100% 100%
Materials 0% 0%
Labor 20% 20%
Overhead 15% 15%
PACKAGING DEPARTMENT
EQUIVALENT PRODUCTION COMPUTATIONS - FIFO

PACKAGING DEPARTMENT
Equivalent Production Computations - FIFO
Month of February 2018

Transferred In Cost From Prior Department

Transferred Out to Finished Goods
Completion of beginning WIP (2,720 x 0%) -
Started and Completed 3,650
Work in Process-End (5,820 x 100%) 5,820
Equivalent units for T-in Costs from Prior Dept. 9,470
Materials
Transferred Out to Next Department
Completion of beginning WIP (2,720 x 100%) 2,720
Started and Completed 3,650
Work in Process-End (5,820 x 0%) -
Equivalent Units for Materials 6,370

Labor
Transferred Out to Next Department
Completion of beginning WIP (2,720 x 80%) 2,176
Started and Completed 3,650
Work in Process-End (5,820 x 20%) 1,164
Equivalent Units for Labor 6,990

Overhead
Transferred Out to Next Department
Completion of beginning WIP (2,720 x 85%) 2,312
Started and Completed 3,650
Work in Process-End (5,820 x 15%) 873
Equivalent Units for Overhead 6,835
PACKAGING DEPARTMENT

COST OF PRODUCTION REPORT

PACKAGING DEPARTMENT
Cost of Production Report
Month of February 2018

QUANTITY SCHEDULE Units

(a) Quantity to Be Accounted For:
Work in Process-Beginning 2,720
Started/Transferred In 9,470
Total to be accounted for 12,190
(b) Quantity Accounted For:
Transferred Out to Finished Goods
From beginning WIP 2,720
Started and Completed 3,650 6,370
Work in Process-Ending 5,820
Total Accounted for 12,190
PACKAGING DEPARTMENT
COST SCHEDULE Total Cost Equivalent Units Unit Costs
(c) Costs to Be Accounted For:
Work in Process - beginning 136,530
Costs Incurred in Current Month
Trans-In Costs fr. Prior Department 430,699 / 9,470 = 45.48036
Costs Incurred in this Dept.
Costs Added this Dept.
Materials 2,560 / 6,370 = 0.40188
Labor 20,480 / 6,990 = 2.92990
Overhead 16,885 / 6,835 = 2.47037
Total Costs in this Dept. 39,925 5.80216
Total Costs this Month 470,624 51.28252
Total Costs to be Accounted For 607,154

(d) Cost Accounted For:

Transferred Out to Finished Goods
From Beginning WIP inventory 136,530
Costs Added this Month
Materials 1,093 = 2,720 x 0.40188
Labor 6,375 = 2,176 x 2.92990
Overhead 5,712 = 2,312 x 2.47037
Costs of Completed Beg. WIP 149,710 / 970 = 154.34
Started and Completed 187,181 = 3,650 x 51.28252
Total Costs of Transferred Out 336,891 / 6,370 = 52.88717

Work in Process - Ending

Trans.-In Costs Fr. Prior Dept. 264,696 = 5,820 x 45.48036
Costs in this Department
Materials - = - x 0.40188
Labor 3,410 = 1,164 x 2.92990
Overhead 2,157 = 873 x 2.47037
Total 270,263
Total Costs Accounted For 607,154
END