ortgage Company uses a process cost system to accumulate costs in its Applicatio

Question

ortgage Company uses a process cost system to accumulate costs in its Application Department. When an application is completed, it is forwarded to the 6 (Part 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 stil", process at September 30 were 100% complete as to materials (forms) and 60% complete as to conversion costs. 7 (Part ssion) ts by Studv Beginning WIP Direct materials Conversion costs 1,410 4,160 September costs Direct materials Direct labor Overhead $4,320 12,300 8,036 Materia's are the forms used in the application process, and these costs are incurred at the beginning of the process. Conversion costs are incurred uniformily during the process ge Company uses the FIFO method. Also, assume that the applicators in process on September i were 100% complete as to materials (application , forms) and 40% complete as to conversion costs. Determine the equivalent units of service (production) for materials and conversion costs. Materials Conversion Costs The equivalent units of service (production) Compute the unit costs. (Round unit costs to 2 decimal places, e.g. 2.25)

Explanation / Answer

UNITS TO ACCOUNT FOR: Beginning Work in Process units 200 Add: Units Started in Process 900 Total Units to account for: 1,100 UNITS TO BE ACCOUNTED FOR: Units completed from Beginning WIP 200 Units started and completed 400 Ending Work in Process 500 Total Units to be accounted for: 1,100 Equivalent Units: Material Cost Conversion % Completion Units % Completion Units Units completed from Beg. WIP 0% 0 60% 120 Units started and completed 100% 400 100% 400 Ending Work in Process 100% 500 60% 300 Total Equivalent units 900 820 COST PER EQUIVALENT UNIT: Material Conversion Total cost added during the year 4,320 20,336 Equivalent Units 900 820 Cost per Equivalent unit 4.8 24.8 TOTAL COST ACCOUNTED FOR: Units Completed from Beginning WIP (200 units) Equivalent unit Cost per EU Total Cost Beginning Cost 5570 Material 0 4.8 0 Conversion Cost 120 24.8 2976 Cost of units completed from Beg WIP 8546 Units started and Transferred out (400 units) Equivalent unit Cost per EU Total Cost Material 400 4.8 1920 Conversion Cost 400 24.8 9920 Total Cost of Units completed and transferred out: 11840 Ending Work in process (500 units) Equivalent unit Cost per EU Total Cost Material 500 4.8 2400 Conversison Cost 300 24.8 7440 Total cost of Ending Work in process: 9,840 Material Conversion Equivalent units 900 820 Material Conversion Cost per unit 4.8 24.8 Cost accounted for: Application completed: WIP sep 1 5570 Conversion cost 2976 8546 Started and completed 11840 20386 WIP Sep30 Material 2400 Conversion cost 7440 9840 Total cost 30226

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