Problem:
Royale Mortgage Company uses a process costing 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.
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1. Applications in process on
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Beginning WIP:
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September 1, 100
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Direct materials
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$ 1,000
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2. Applications started in
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Conversion costs
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3,960
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September, 900
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September costs:
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3. Completed applications during
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Direct materials
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$ 4,500
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September, 800
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Direct labor
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12,000
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4. Applications still in process at
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Overhead
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9,340
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September 30 were 100%
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complete as to materials (forms)
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and 60% complete as to conversion
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costs.
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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.