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.

Beginning WIP:
Direct materials		$1,320
Conversion costs		4,160
September costs:
Direct materials		$4,730
Direct labor		12,160
Overhead		7,440

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.

Part 1

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

		Materials		Conversion Costs
The equivalent units of service (production)

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Part 2

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

		Materials		Conversion Costs
Unit costs		$		$

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Part 3

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.

Equivalent units of production

	Materials	Conversion
Units Completed and transferred	600	600
Units in Ending WIP	500	300(500×60%)
Equivalent units	1,100	900

2.

Cost per unit

	Materials	Conversion
Beginning WIP	$1,320	$4,160
Current period costs	$4,730	$19,600
Total costs	$6,050	$23,760
÷ Equivalent units	1,100	900
Cost per unit	$5.5	$26.4

3. Cost reconciliation

Cost of units transferred out
Transferred out (600× ($5.5+$26.4))	$19,140
Work in process, September 30
Materials (500×$5.5)	$2,750
Conversion (300×$26.4)	$7,920
Total cost	$29,810