Royale Mortgage Company uses a process cost system to accumulate costs in its lo

Question

Royale Mortgage Company uses a process cost 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. Applications in process on September 1, 100 2. Applications started in September, 900 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 Conversion costs $1,000 3,960 September costs: Direct materials Direct labor Overhead $4,500 12,000 9,340 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 Your answer is incorrect. Try again Determine the equivalent units of service (production) for materials and conversion costs The equivalent units of service (production) 27.30

Explanation / Answer

Equivalent units of production for material and conversion cost is calculated as under:

Direct Material Conversion Cost Opening applications 100 0 100 Applications completed in september 800 800 800 Applications still in process 100 100 60 900 960 Beginning WIP 1,000 3,960 Cost incurred in september Material 4,500 4,500 4,500 Labour 12,000 12,000 12,000 Overhead 9,350 9,350 9,350 Per unit cost 30 31

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