Question

Question 3 Hi-Tech Mortgage Company uses a process costing system to accumulate costs in its loan 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. $1,160 3,880 2. Applications in process on September 1, 80 Applications started in September, 1,180 Completed applications during September, 820 Applications still in process at September 30 were 100% complete in terms of materials (forms) and 60% complete in terms of conversion costs. Beginning work in process: Direct materials Conversion costs September costs: Direct materials Direct labour 3. $7,660 11,050 11,086 4. 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

Solution 3:

Hi-Tech Mortgage Company
Production Cost report - Loan Application Department
Computation of Equivalent unit of Production
Particulars	Physical Units	Material	Conversion
Units to account for:
Beginning WIP	80
Started into Production	1180
Total units to account for	1260
Units accounted for:
Unit completed & Transferred out	820	820	820
Units in ending inventory:	440
Material (100%)		440
Conversion (60%)			264
Equivalent units of production	1260	1260	1084

Hi-Tech Mortgage Company Computation of Cost per equivalent unit - Loan Application department
Particulars	Material	Conversion	Total
Opening WIP	$1,160	$3,880	$5,040
Cost Added during Period	$7,660	$22,136	$29,796
Total cost to be accounted for	$8,820	$26,016	$34,836
Equivalent units of production	1260	1084
Cost per Equivalent unit	$7.00	$24.00

Hi-Tech Mortgage Company Computation of Cost of ending WIP and units completed & transferred out - Loan application Department
Particulars	Material	Conversion	Total
Equivalent unit of Ending WIP	440	264
Cost per equivalent unit	$7.00	$24.00
Cost of Ending WIP (Equivalent unit * Cost per equivalent unit)	$3,080	$6,336	$9,416
Units completed and transferred	820	820
Cost of units completed & Transferred (Unit completed * cost per equivalent unit)	$5,740	$19,680	$25,420

Cost reconciliation - Loan Application Department
Particulars	Amount
Costs to be accounted for:
Cost of beginning WIP inventory	$5,040.00
Cost added to production	$29,796.00
Total Costs to be accounted for	$34,836.00
Costs accounted for as follows:
Cost of unit transferred out	$25,420
Ending WIP:
Material	$3,080
Converison	$6,336
Total Ending WIP	$9,416
Total costs accounted for	$34,836