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: 1000

3. Completed Applications during September:800.

4. Applications still in process at September 30 : 100% complete as to materials (forms) and 60 % complete as to conversions costs.

Beginning WIP:

Direct materials - $1,000

Conversion costs- $3960

September costs:

Direct Materials - $ 4500

Direct labor- $ 12000

Overhead $ 9,520

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.

Instructions:

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

b. Compute the unit costs and prepare a cost reconciliation schedule.

Explanation:

opening wip                 100

Started                         1000

                                      1100

completed                   -800

closing wip                   300

Using weighted Average process cost Table

cost         opening      current     Total      complete   Wip   equivalent   Cost

head                                              cost                                        Units       p.unit  

material    1000           4500        5500        800         300        1100            5

CC            3960           21520      25480       800         180          980          26

                                                     30980                                                        31

A) equivalent units of service (production ) for materials and conversion costs.

material                1100

CC                         980

B)

unit costs

material                5

CC                        26

                            31  

Complete  800   31.00   24,800  

Closing Wip    

Material         300   5.00     1,500  

Labour          180   26.00     4,680  

                                     6,180  

Total Cost                     30,980  

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