Final answer:
WIP inventory on a production cost report includes direct materials, direct labor, and manufacturing overhead. These are the three elements that, when combined, represent the total manufacturing costs incurred in the production of goods, including the factor payments for inputs used.
Step-by-step explanation:
The costs that comprise Work in Process (WIP) inventory on a production cost report are direct materials, direct labor, and manufacturing overhead. These three components are considered the primary elements of manufacturing costs associated with the production of goods. The production cost of an item is calculated based on the input required to produce it and the associated factor payments. This includes payments for labor (wages and salaries), the use of materials, and allocated manufacturing overhead costs, which can include indirect materials, indirect labor, and various factory-related expenses that cannot be directly traced to a single unit of product.
For instance, if we consider a production function for creating widgets, the cost for producing a certain number of widgets would include the labor (workers) required and the materials used, as well as overhead costs that support the production process but are not solely attributed to the widgets themselves, like factory rent, utilities, and maintenance of equipment.