In its Department R, Recyclers, Inc., processes donated scrapcloth into towels for sale in local thrift shops. It sells theproducts at cost. The direct materials costs are zero, but theoperation requires the use of direct labor and overhead. Thecompany uses a process costing system and tracks the processingvolume and costs incurred in each period. At the start of thecurrent period, 300 towels were in process and were 60 percentcomplete. The costs incurred were $576. During the month, costs of$10,800 were incurred, 2,700 towels were started, and 150 towelswere still in process at the end of the month. At the end of themonth, the towels were 20 percent complete.
Required: a. Prepare a production cost report; the company usesFIFO process costing.
b. Show the flow of costs through T-accounts. Assume thatcurrent period conversion costs are credited to variouspayables.
