ECONOMICS

Detailed explanation-1: -A production cost report is a report prepared by a processing department for equivalent units of production, production costs, and the assignment of those costs to the completed and in process units.

Detailed explanation-2: -Definition of Equivalent Unit of Production Basically the fully completed units and the partially completed units are expressed in terms of fully completed units. Equivalent units are used in the production cost reports for the producing departments of manufacturers using a process costing system.

Detailed explanation-3: -What is a Production Cost Report? A production cost report identifies the total cost (direct materials, labor, and overhead), of producing a product. A production cost report helps managers answer several important questions: How much does it cost to produce each unit of product for each department?

Detailed explanation-4: -To simply calculate equivalent units, you can multiply the number of physical items by the percentage of the work done on them. For two items that are 50% done, you would have one equivalent unit (2 x 50% = 1). When the items are completely finished, the number of equivalent units is equal to the physical items.

Detailed explanation-5: -It is the number of completed units of an item that a company could theoretically have produced, given the amount of direct materials, direct labor, and manufacturing overhead costs incurred during that period for the items not yet completed.