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Home Process costing system Cost of production report Cost of production report - testing Department (3rd department)

Cost of Production Report - Terminal Department (3rd - Final Department):

We recommend to see the cost of production report of the first and second department before you continue.

  1. Click here to see the cost of production report of the first department

  2. Click here to see the cost of production report of Second Department

The cost of production report of 3rd and final department is illustrated below:

The Clonex Corporation
Terminal Department (3rd Dept.)
Cost of Production Report
For the Month of January, 19        

Quantity Schedule:    
Units received from the preceding department   40,000
Units transferred to finished goods storeroom 35,000  
Units still in process (1/4 labor and FOH) 4,000  
Units lost in process 1,000 40,000
Cost Charged To the Department: Total
Cost from preceding department:
Transferred in during the month $140,400 $3.51
Cost added by the department:
Labor 32,400 0.90
Factory Overhead (FOH) 19,800
Total cost added $52,500 $1.45
Adjusted for lost units 0.09*
------- ------
Total cost to be accounted for $192,600 $5.05
====== ======
Cost Accounted for as Follows:    
Transferred to finished goods storeroom (35,000 $5.05)   $176,750
Work in process - ending inventory:
Adjusted cost from preceding department [4,000 ($3.51 + $0.09)]
Labor (4,000 1/4 $0.90) 900
Factory Overhead (4,000 1/4 $0.55) 550
Total cost accounted for $192,600

Additional Computations:

Equivalent Production:

Labor and factory overhead = 35,000 + 4,000 / 4 = 36,000 units

Unit Costs:

Labor = $32,400 / 36,000 = $0.90 per unit

Factory overhead = $19,800 / 36,000 = 0.55 per unit

*Adjustment for lost units:

Method No.1: $140,400 / 39,000 = $3.60; $3.60 - $3.51 = $0.09 per unit

Method No.2: 1,000 units $3.51 = $3,510; $3,510 / 39,000 = $0.09 per unit


Total and unit cost figures were derived by using procedures discussed for the cost of production report of the Testing Department. The work completed is transferred to the finished goods storeroom; thus, the title "Transferred to finished goods storeroom" is used in place of the title "Transferred to next department." Cost charged to the Terminal Department come from the payroll distribution and the department's expense analysis sheet. The journal entry transferring costs from the Testing Department follows:

Work in process - Terminal Department                            140,000
           Work in process - Testing Department                            140,000

The entry to transfer finished units to the finished goods storeroom is presented below:

Finished Goods                                                           176,750
           Work in process - Terminal Department                          176,750

You may also be interested in other useful articles from "process costing system" chapter:

  1. Definition and explanation of process costing system
  2. Characteristics  and Procedures of Process Costing System
  3. Costing By Departments
  4. Product Flow
  5. Procedure for Materials, Labor and Factory Overhead Costs in a Process Costing System
  6. Cost of Production Report (CPR)
  7. General Questions and Answers About Process Costing
  8. Exercises and Problems
  9. Process Costing System - Case Study


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