Acceptance Credit Corporation is a wholly owned subsidiary of a large manufacturer of computers. Acceptance is in the business of financing computers, software, and other services that the parent corporation sells. Acceptance has two departments that are involved in financing services: the credit department and the business practices department. The credit department receives requests for financing from field sales representatives and enters customer information into the computer system to check the creditworthiness of the customer. Once creditworthiness information is known, a printout is produced with this information and is transferred to the business practices department. The business practices department drafts the loan covenant. The loan is then priced. Finally, a form specifying the loan terms is attached to the transferred-in document. A copy of the loan-term form is sent to the sales representative and serves as the quote letter.

The following cost and service activity data for the business practices department are provided for the month of May:

Transferred-in applications ..............2,800

Applications in process, May 1, 40% complete* .... 500

Applications in process, May 31, 25% complete* ... 800

*All materials and supplies are used at the end of the process.

Required:
1. How would you define the output of the business practices department?
2. Using the FIFO method, prepare the following for the business practices department:
a. A physical flow schedule
b. An equivalent units schedule
c. Calculation of unit costs
d. Cost of ending work in process and cost of units transferred out
e. A costreconciliation

Transcribed Image Text:

Direct Conversion Costs Transferred In Materials Costs: Beginning work in process Costs added $4,500 28,000 S 2,800 37,500 $1,250