Question

In its Department R, Recyclers, Inc., processes donated scrap cloth into towels for sale in local thrift shops. It sells the products at cost. The direct materials costs are zero, but the operation requires the use of direct labor and overhead. The company uses a process costing system and tracks the processing volume and costs incurred in each period. At the start of the current period, 400 towels were in process and were 60 percent complete. The costs incurred were $593. During the month, costs of $16,450 were incurred, 4,700 towels were started, and 200 towels were still in process at the end of the month. At the end of the month, the towels were 20 percent complete. Required: a. Prepare a production cost report; the company uses weighted average process costing. b. Show the flow of costs through T-accounts. Assume that current period conversion costs are credited to various payables.

Answer 1

Answer
a.
Production Cost Report
	Physical Units
Units to be accounted for:
Beginning WIP inventory	400
Units started this period	4700
Total units to be accounted for	5100
		Equivalent units
		Material	Conversion
Units accounted for:
Units completed and transferred out:	4900	0	4900
Work in the process ending	200	0	40
Total units to be accounted for	5100	0	4940
	Total cost	Material	Conversion
Cost accounted for:
Work in the process beginning	593	0	593
cost added during the month	16450	0	16450
Total cost to be accounted for	17043	0	17043
Cost per equivalent unit	3.45	0	3.45
Cost accounted for
Completed and transferred out	16905	0	16905
	138	0	138
	17043	0	17043
b)
Various payable
	Debit		Credit
			16450
Work in process inventory
	Debit		Credit
Beg Bal	593		17181
	16450
Ending bal	138
Finished goods
	Debit		Credit
	17181