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, 450 towels were in process and were 60 percent complete. The costs incurred were $160. During the month, costs of $15,600 were incurred, 3,900 towels were started, and 225 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. b. Show the flow of costs through T-accounts. Assume that current period conversion costs are credited to various payables.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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
During the month, costs of $15,600 were incurred, 3,900 towels were started, and 225 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.
b. Show the flow of costs through T-accounts. Assume that current period conversion costs are credited to various payables.
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