CE $16-1$

City University uses a process cost system to accumulate costs incurred in handling student applications in the

admissions department. When an application is completed, it is forwarded to the appropriate academic department

for final processing. The following processing and cost data pertain to March.

Beginning WIP:

Direct materials

$ $2,125$

Conversion costs

$9,450$

March costs:

Direct materials

Direct labor

Overhead

$ $8,000$

$43,000$

$10,050$

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. City University uses the weighted$-$average method to

compute equivalent units.

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.

$($c$)$ In an effort to improve efficiency, City University has changed their admissions procedures. Instead of

adding all of the materials at the beginning of the process, they have decided to add half of the materials at

the end of the process right before the applications are transferred to the academic departments. This has

resulted in a $$2,000$ savings in March's direct materials costs $($beginning direct materials are not affected$).$

Determine the equivalent units of service $($production$)$ and the cost per equivalent unit for materials based

on this change. If City University processes $12,000$ applications during a typical year, what is the total dollar

amount of savings that will result from this change?