(a) Materials Conversion Costs Royale Mortgage Company uses a process cost syste
ID: 2498381 • Letter: #
Question
(a)
Materials
Conversion Costs
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 $1,220 Conversion costs 5,020 September costs: Direct materials $4,880 Direct labor 13,010 Overhead 6,994
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.
Explanation / Answer
Statement ofequivalent Production Particulars Materials %completion Equivalent mat Conv Units %completion Equivalent Conv Units Opening WIP 100.00 0.00% - 100.00 50.00% 50.00 Units started and completed(800-100) 700.00 100.00% 700.00 700.00 100.00% 700.00 Closing WIP(900-700) 200.00 100.00% 200.00 200.00 60.00% 120.00 Equivalent units 900.00 870.00 Note : since nothing is specified we have used FIFO method and assumed 50% conversion for opening WIP
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