Exercise 16-16 Sentena Mortgage Company uses a process costing 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 . Applications in process on September , 190 2. Applications started in September, 1,000 3. Completed applications during September,710 4-Applications still in process at September 30 were 100% complete as to materials (forms) and 60% complete as to conversion costs. Beginning 1,420 Conversion 4,260 September Direct $5,440 Direct 12,900 labor Overhead 9,597 Materials are the forms used in the application process, and these costs are incurred at the beginning of the process. Conversion coets are incurred uniformly during the process Santana Mortgage Company uses the FIFO method. Also, assume that the applications in process on September 1 were 100% complete as to materials forms and 40% complete as to conversion costs. Determine the equivalent units of service (production) for materials and conversion costs. The equivalent units of service (production) Compute the unit costs. (Round unit costs to 2 decimal place e.g. 2.25.) Unit costs Prepare a cost reconciliation schedule. (Round unit costs to 2 decimmal places, e.g. 2.25 and final answers to O decimal places, e.g. 1,225.) Costs accounted for: Applications completnd: Hok in process, September 1 Conversien costs Sarted and compiatod Work in process, September 30 Conversion costs Total costS Question Attempts: O of 3 used
Solution:
Solution:
Opening WIP of application = 190
Application started during September = 1000
Application completed = 710
Closing WIP of application = 190 + 1000 - 710 = 480 application
Now for closing WIP, 100% completed as to material and 60% completed as to conversion cost
Therefore equivalent number of unit completed in closing WIP with respect to material = 480
Therefore equivalent number of unit completed in closing WIP with respect to conversion cost = 480*60% = 288
For Opening WIP already, 100% completed as to material and 40% completed as to conversion cost,
Therefore equivalent number of unit in opening WIP with respect to material = 190
Therefore equivalent number of unit in opening WIP with respect to conversion cost = 190*40% = 76
Equivalent unit of service (production) in material = Unit transferred + Equivalent unit of Closing WIP with respect to material – Equivalent number of units in opening WIP with respect to material
= 710 + 480 - 190 = 1000 units
Equivalent unit of service in conversion cost = Unit transferred + Equivalent unit of Closing WIP with respect to Conversion cost - Equivalent number of units in opening WIP with respect to material
= 710 + 288 - 76 = 922 units
| Computation of unit cost for September |
| Type of Cost | Amount | Equivalent Units | Per unit Cost |
| Material | $5,440.00 | 1000 | $5.44 |
| Conversion Cost | $22,497.00 | 922 | $24.40 |
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