Question

Santana Mortgage Company uses a process cost system to accumulate costs in its Application Department. When an application is completed, it is forwarded to the Loan Department for final processing. The following processing and cost data pertain to September. 1. Applications in process on September 1, 200 2. Applications started in September, 1,000 3. Completed applications during September, 700 4. Applications still in process at September 30 were 100% complete as to materials (forms) and 60% complete as to conversion costs. Beginning WIP: Direct materials $1,110 4,930 Conversion costs September costs: Direct materials Direct labor $5,130 12,680 8,890 Overhead Materials are the forms used in the application process, and these costs are incurred at the beginning of the process. Conversion costs are incurred uniformly during the process.

Answer 1

1
	Materials	Conversion costs
Units completed	700	700
Units in ending work in process	500	300	=500*60%
The Equivalent units of service (production)	1200	1000
2
	Materials	Conversion costs
Beginning WIP	1110	4930
September costs	5130	21570
Total costs	6240	26500
Divide by Equivalent units of production	1200	1000
Unit costs	5.20	26.50
3
Costs accounted for		22190	=700*(5.2+26.5)
Transferred out
Work in process, September 30
Materials	2600		=500*5.2
Conversion costs	7950	10550	=300*26.5
Total costs		32740