Question

Question 4 of 15 -73 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. 2. 3. Applications in process on September 1, 200 Applications started in September, 1,000 Completed applications during September, 700 Applications still in process at September 30 were 100% complete as to materials (forms) and 60% complete as to conversion costs. 4. $1,110 4,930 Beginning WIP: Direct materials Conversion costs September costs: Direct materials Direct labor Overhead $5,130 12,680 8,890

Answer 1

1	Equivalent units of production
	Opening inprocess applications	200	(1200-1000)
	Application started in Sep	1000
	Total Applications	1200
	Applications completed	700
	Closing inprocess application	500
	Paticulars	Materials	Conversion Costs
	Applications completed	700*100% = 700	700*100%=700
	Closing inprocess application	500*100%=500	500*60%=300*
	Equivalent Units	1200	1000
	* As inprocess closing application completed 60% in respect of conversion cost
2	Computation of unit cost
	Paticulars	Materials	Conversion Costs
	Opening inprocess application costs	1110	4930
	Cost incurred in Sep	5130	21570
	Total Cost	6240	26500
	Equivalent Units	1200	1000
	Total Cost per unit	5.20	26.50
3	Cost accounted for	Units	Calculation	Amount
	Transferred out	700	700*(5.2+26.5)	22190
	Work in process closing
	Material	500	500*5.2	2600
	Conversion Cost	300	300*26.5	7950
	Total Cost			32740