Question

Exercise 3-16 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, 200 2. Applications started in September, 1,000 3. Completed applications during September, 700 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 $1,320 Conversion costs 5,060 September costs: Direct materials $5,100 Direct labor 12,500 Overhead 9,856 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. Santana Mortgage Company uses the FIFO method. Also, assume that the applications in process on September 1 were 100% complete as to materials (application forms) and 40% complete as to conversion costs. Your answer is partially correct. Try again. Determine the equivalent units of service (production) for materials and conversion costs. Materials Conversion Costs The equivalent units of service (production) Your answer is incorrect. Try again. Compute the unit costs. (Round unit costs to 2 decimal places, e.g. 2.25.) Materials Conversion Costs Unit costs $ $ Your answer is incorrect. Try again. Prepare a cost reconciliation schedule. (Round unit costs to 2 decimal places, e.g. 2.25 and final answers to 0 decimal places, e.g. 1,225.) Costs accounted for: Applications completed: Work in process, September 1 $ Conversion costs $ Started and completed $ Work in process, September 30: Materials Conversion costs Total costs $ Click if you would like to Show Work for this question: Open Show Work Question Attempts: 8 of 15 used Save for later Submit Answer Exercise 3-16 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, 200 2. Applications started in September, 1,000 3. Completed applications during September, 700 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 $1,320 Conversion costs 5,060 September costs: Direct materials $5,100 Direct labor 12,500 Overhead 9,856 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. Santana Mortgage Company uses the FIFO method. Also, assume that the applications in process on September 1 were 100% complete as to materials (application forms) and 40% complete as to conversion costs. Your answer is partially correct. Try again. Determine the equivalent units of service (production) for materials and conversion costs. Materials Conversion Costs The equivalent units of service (production) Your answer is incorrect. Try again. Compute the unit costs. (Round unit costs to 2 decimal places, e.g. 2.25.) Materials Conversion Costs Unit costs $ $ Your answer is incorrect. Try again. Prepare a cost reconciliation schedule. (Round unit costs to 2 decimal places, e.g. 2.25 and final answers to 0 decimal places, e.g. 1,225.) Costs accounted for: Applications completed: Work in process, September 1 $ Conversion costs $ Started and completed $ Work in process, September 30: Materials Conversion costs Total costs $ Click if you would like to Show Work for this question: Open Show Work Question Attempts: 8 of 15 used Save for later Submit Answer

Answer 1

Solution:

Application department
Computation of Equivalent unit (FIFO)
Particulars	Physical units	Material	Conversion
Units to be accounted for:
Beginning WIP Inventory	200
Units started this period	1000
Total unit to be accounted for	1200
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 0% Conversion - 60%	200	0	120
Started and completed currently	500	500	500
Units in ending WIP Material - 100% Conversion - 60%	500	500	300
Total units accounted for	1200	1000	920

Santana Mortgage Company
Application department
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$27,456.00	$5,100.00	$22,356.00
Equivalent units		1000	920
Cost per equivalent unit		$5.10	$24.30

Santana Mortgage Company
Application department
Producton cost report - FIFO
Particulars	Total cost	Material	Conversion
Cost Accounted for :
Cost assigned to unit transferred out:
Cost from beginning WIP Inventory	$6,380	$1,320	$5,060
Current cost added to complete beginning WIP:
Material	$0	$0
Conversion (120*$24.30)	$2,916		$2,916
Total Cost from beginning inventory	$9,296	$1,320	$7,976
Current cost of unit started and completed:
Material (500*$5.10)	$2,550	$2,550
Conversion (500*$24.30)	$12,150		$12,150
Total cost of unit started and completed	$14,700	$2,550	$12,150
Total cost of unit transferred out	$23,996	$3,870	$20,126
Cost assigned to ending WIP:
Material (500*$5.10)	$2,550	$2,550
Conversion (300*$24.30)	$7,290		$7,290
Total ending WIP inventory	$9,840	$2,550	$7,290
Total cost accounted for	$33,836	$6,420	$27,416