Exercise 16-15 (Part Level Submission) Santana Mortgage Company uses a process c

Question

Exercise 16-15 (Part Level Submission)

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.

Exercise 16-15 (Part Level Submission) 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, 130 2. Applications started in September, 920 3. Completed applications during September, 690 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 $1,400 Conversion costs 5,020 September costs: Direct materials Direct labor Overhead $4,763 12,620 5,970 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. (a) Determine the equivalent units of service (production) for materials and conversion costs. Materials Conversion Costs The equivalent units of service (production) Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

Solution:

Opening WIP of application = 130

Application started during September = 920

Application completed = 690

Closing WIP of application = 130 + 920 - 690 = 360 application

Now for closing WIP, 100% completed as to material and 60% completed as to conversion cost

Therefore equivalant number of unit completed in closing WIP with respect to material = 360

Therefore equivalant number of unit completed in closing WIP with respect to conversion cost = 360*60% = 216

Equivalant unit of service in material = Unit transfered + Equivalant unit of Closing WIP with respect to material

= 690 + 360 = 1050 units

Equivalant unit of service in conversion cost = Unit transfered + Equivalant unit of Closing WIP with respect to Conversion cost

= 690 + 216 = 906 units

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