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?
• Which production cost is the highest—direct materials, direct labor, or overhead?
• Where are we having difficulties in the production process?
• Are we seeing any significant changes in unit costs for direct materials, direct labor, or overhead? If so, why?
• How many units flow through each processing department each month?
• Are improvements in the production process being reflected in the cost per unit from one month to the next?

Note: The per unit cost data provided in the production cost report be misleading, as the report does not identify costs as variable or fixed. 

Cost Behavior Patterns

To predict what will happen to profit in the future, we must understand how costs behave with changes in the number of units sold (sales volume). 

Some costs will not change at all with a change in sales volume (e.g., monthly rent for the production facility). 

Some costs will change with a change in sales volume (e.g., materials for the mountain bikes). 

The three basic cost behavior patterns are known as variable, fixed, and mixed. 

Related Topics

• Job Costing vs Process Costing
• Assign Direct Material and Direct Labor to Job
• Assign Manufacturing Overhead Costs to Job
• Assign Overhead Costs to Products
• Plantwide Cost Allocation
• Department Cost Allocation
• Activity-Based Costing
• Weighted-Average Cost of Products
• Production Cost Report
• Fixed, Variable, and Mixed Cost Estimations
• Contribution Margin Income Statement
• Cost-Volume-Profit Analysis
• Margin of Safety
• Contribution Margin per Unit of Constraint
• Absorption Costing vs Variable Costing
• Differential Analysis and Decisions
• Cost Decisions for Joint Products
• Capital Budgeting
• Life Cycle Costing
• The Master Budget
• Activity-Based Budgeting
• Standard Costs
• Imputed Value
• Variance Analysis for Product Costs
• Absorption Pricing
• Price Variance
• Absorption Variance 
• Responsibility Centers
• Comparing Segmented Income
• Using ROI to Evaluate Performance
• Using Residual Income to Evaluate Performance
• Use Economic Value Added to Evaluate Performance
• Transfer Pricing