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, 300 towels were in process and were 60 percent complete. The costs incurred were $576. During the month, costs of $10,800 were incurred, 2,700 towels were started, and 150 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.
RECYCLERS, INC.
Production Cost Report—FIFO
Flow of Production Units Compute Equivalent Units
Physical Units Conversion Costs
Units to be accounted for:
Beginning WIP inventory 300
Units started this period
Total units to be accounted for 300
Units accounted for:
Units completed and transferred out:
From beginning inventory
Started and completed currently
Units in ending WIP inventory
Total units accounted for 0 0
Costs Total Costs Conversion Costs
Costs to be accounted for:
Costs in beginning WIP inventory
Current period costs
Total costs to be accounted for $0 $0
Cost per equivalent unit:
Conversion costs
Costs accounted for:
Costs assigned to units transferred out:
Costs from beginning inventory
Current costs added to complete beginning WIP inventory:
Conversion costs
Total costs from beginning inventory $0
Current costs of units started and completed:
Conversion costs
Total costs of units started and completed $0
Total costs of units transferred out $0
Costs assigned to ending WIP inventory:
Conversion costs
Total ending WIP inventory $0
Total costs accounted for $0 $0
B. Show the flow of costs through T-accounts. Assume that current period conversion costs are credited to various payables.
Work in Process Various Payables
Beginning inventory Beg.bal.
This period's costs: End.bal.
Ending inventory
Finished Goods Inventory
Beg.bal.
End.bal.

Answer 1

Answer:

Units to be accounted for:

Beg WIP    300 units

started     2700 units

Total       3,000 units

Equivalent units  

                physical    materials  conversion

tranferred    2,850       2,850           2,850

ending             150           150     (20%)  30

total              3,000      2,700           2,880

Cost to be accounted for:

                 materials      conversion

beg WIP              0                576

incurred              0           10,800

Total                    0            11,376

Equivalent unis cost

materials zero

conversion: $11,376 / 2,880 = $3.95

Cost assigned for:

Transferred units

2,850 units x 3.95 = 11,257.5

ending work in process units

30 units x 3.95 = 118.5

Total cost to be assigned for 11,376

Notice: Total cost to be asisgned for and assigned cost are the same.

Explanation:

1) We count the physical units

2) Then, we solve for the equivalent units which, under weighted average are:

transferred units + completion on ending work in process.

3) Now, we solve for equivalent unit cost:

for materials, this is zero are there is no cost associaed with.

4) Finally, we made the cost assignment which, should match the beginning WP cost and the incurred cost during the period.