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, 1,000
3.		Completed applications during September, 800
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		$1,140
Conversion costs		4,070
September costs:
Direct materials		$5,460
Direct labor		12,960
Overhead		9,332

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

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

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.)

Answer 1

1
	Materials	Conversion Costs
Completed applications	800	800
Work in Process September 30	300	180
The equivalent units of service (production)	1100	980
2
	Materials	Conversion Costs
Beginning WIP	1140	4070
September costs	5460	22292
Total costs	6600	26362
Divided by equivalent units of service	1100	980
Unit costs	6	26.9
3
Costs accounted for:
Transferred out		26320	=800*(6+26.9)
Work in process, September 30
Materials	1800		=300*6
Conversion costs	4842	6642	=180*26.9
Total costs		32962