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, 500 towels were in process and were 60 percent complete. The costs incurred were $176.

During the month, costs of $20,150 were incurred, 3,100 towels were started, and 250 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 FIFO process costing. (Round "Cost per equivalent unit" to 2 decimal places.)

b. Show the flow of costs through T-accounts. Assume that current period conversion costs are credited to various payables.

Answer 1

	Physcial units	Conversion
Work in Process Beginning	500
Started during the period	3100
To account for	3600
Work in Process Beginning	500	200
Units started and completed	2850	2850
Units transferred to next department	3350	3050
Ending Work in Process :	250	50
Accounted for	3600
Equivalent units		3100
	Conversion
Cost added during the period	$         20,150
Equivalent units of Production	3100
Cost per equivalent unit	$             6.50
Cost Reconciliation
	Conversion
Ending work in Process Inventory
Equivalent units of Production	50
Cost per equivalent unit	$             6.50
Cost of Ending work in Process Inventory	$              325
	Conversion
Units Completed and transferred out
Cost of Beginning Work in Process	$              176
Cost of work on Beginning Work in Process	$           1,300
Total Cost of Beginning WIP	$           1,476
Units started and completed	2850
Cost per equivalent unit	$             6.50
Cost of units started and completed	$         18,525
Cost of units transferred out	$         20,001
Reconciliation
Costs to be accounted for :
Cost of beginning work in process inventory	$              176
Costs added to the production during the year	$         20,150
Total Costs to be accounted for	$         20,326
Cost of Ending work in Process Inventory	$              325
Cost of units transferred out	$         20,001
Total Costs accounted for	$         20,326

b.

Work in Process
Beginning Balance	$              176	$         20,001	Finished Goods
Conversion Costs	$         20,150
Ending Balance	$              325
Conversion Costs
Various Payables	$         20,150	$         20,150	Work in Process
Ending Balance	$                  -