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, 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		$1,320
Conversion costs		4,230
September costs:
Direct materials		$3,880
Direct labor		12,210
Overhead		6,968

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.

New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is incorrect.

Determine the equivalent units of service (production) for materials and conversion costs.

		Materials		Conversion Costs
The equivalent units of service (production)

  

  

New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is incorrect.

Compute the unit cost. (Round unit costs to 2 decimal places, e.g. 2.25.)

		Materials		Conversion Costs
Unit costs		$		$

  

  

New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is incorrect.

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

Solution

	Material	Conversion
Equivalent Units of Production	1,000	880

.

	Material	Conversion
Cost per equivalent Unit	$ 5.20	$ 26.60

.

Costs accounted for:
Transferred out		$            22,260
Work in process, September 30
Materials	$           1,560
Conversion costs	$           4,788	$              6,348
Total costs		$            28,608

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
	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	TOTAL
Beginning WIP Inventory Cost (A)		$ 1,320	$ 4,230	$ 5,550
Cost incurred during period (B)		$ 3,880	$ 19,178	$ 23,058
Total Cost to be accounted for (C=A+B)		$ 5,200	$ 23,408	$ 28,608
Total Equivalent Units(D)		1,000	880
Cost per Equivalent Units (E=C/D)		$ 5.20	$ 26.60	$ 31.80

..

Statement of cost (Weighted average)
Cost	Equivalent Cost/unit	Ending WIP		Transferred
		Units	Cost Allocated	Units	Cost Allocated
Material	$ 5.20	300	$             1,560.00	700	$            3,640.00
Conversion	$ 26.60	180	$             4,788.00	700	$          18,620.00
TOTAL	$ 28,608	TOTAL	$ 6,348	TOTAL	$ 22,260