Question

Exercise 3-15 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, 100 2. Applications started in September, 900 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 Conversion costs September costs: $1,390 4,630 Direct materials Direct labor $4,410 12,880 5,810 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. Determine the equivalent units of service (production) for materials and conversion costs. Materials Conversion Costs The equivalent units of service (production)

Answer 1

Solution

	Material	Conversion
Equivalent Units of Production	1,000	880

.

	Material	Conversion
Unit cost	$                    5.80	$                 26.50

.

Costs accounted for:
Transferred out		$            22,610
Work in process, September 30
Materials	$           1,740
Conversion costs	$           4,770	$              6,510
Total costs		$            29,120

Working

Reconciliation of Units
A	Beginning WIP	100
B	Introduced	900
C=A+B	TOTAL	1,000
D	Transferred out	700
E=C-D	Ending WIP	300

.

Statement of Equivalent Units(Weighted average)
				Material		Conversion cost
	Units			Complete %	Equivalent units	Complete %	Equivalent units
Transferred out	700			100%	700	100%	700
Ending WIP	300			100%	300	60%	180
Total	1,000			Total	1,000	Total	880

.

Cost per Equivalent Units (Weighted average)
COST		Material	Conversion cost	TOTAL
Beginning WIP Inventory Cost		$ 1,390	$ 4,630	$ 6,020
Cost incurred during period		$ 4,410	$ 18,690	$ 23,100
Total Cost to be accounted for		$ 5,800	$ 23,320	$ 29,120
Total Equivalent Units		1,000	880
Cost per Equivalent Units		$                   5.80	$                   26.50	$             32.30

.

Statement of cost (Weighted average)
Cost	Equivalent Cost/unit	Ending WIP		Transferred
		Units	Cost Allocated	Units	Cost Allocated
Material	$ 5.80	300	$             1,740.00	700	$ 4,060
Conversion cost	$ 26.50	180	$             4,770.00	700	$ 18,550
TOTAL	$ 29,120	TOTAL	$ 6,510	TOTAL	$ 22,610