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, 900 3. Completed applications during September, 600 4. Applications still in process at September 30 were 100% complete as to materials (forms) and 60% complete as to conversion costs. $1,500 4,970 Beginning WIP: Direct materials Conversion costs September costs: Direct materials Direct labor Overhead $4,220 12,350 6,410 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. Determine the equivalent units of service (production) for materials and conversion costs. Materials Conversion Costs The equivalent units of service (production) Compute the unit cost. (Round unit costs to 2 decimal places, e.g. 2.25.) Materials Conversion Costs Unit costs Prepare a cost reconciliation schedule. (Round unit costs to 2 decimal places, e.g. 2.25 and final answers to 0 decimal places, e.g. 1,225.) Costs accounted for: Transferred out Work in process, September 30 Materials Conversion costs Total costs

Answer 1

1) The equivalent units of services (production) for materials and conversion costs. Materials Conversion Costs The equivalent units of services production) 1.100 900 2) The units cost: Materials $5.20 Conversion Costs $26.40 Unit costs 3) $18.960 Prepare a cost reconciliation Schedule: Costs to be account for: Transferred out Work in process, Sepetember 30 Materials Conversion costs Total costs $2,600 $7.920 $10.520 $29,480 Workings: Flow of production Physical Units Materials Conversion Costs Units to account for Beginning work in process units Units started during period Total unit to account for 200 900 1.100 Units to be account for: Units completed Ending work in process units Total units to be account for 600 500 1.100 600 500 1.100 600 300 900 Costs Materials Conversion Costs Totals Costs to account for Beginning work in process costs Costs added during period Total costs to account for (a) Equivalent units (6) Cost per equivalent unit (a) / (b) $1,500 $4,220 $5,720 1.100 $5.20 $4.970 $18.790 $23.760 $6,470 $23,010 $29,480 $26.40 Cost accounted for Completed and transferred out units Ending work in process costs Total Costs accounted for $3.120 $2,600 $5,720 $15.840 $7.920 $23.760 $18.960 $10.520 $29,480