Verber 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.

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 reconciliationschedule.

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Beginning WIP: Direct materials Conversion costs September costs: Direct materials Direct labor Overhead 1. Applications in process on September 1, 100 2. Applications started in September, 900 3. Completed applications during September, 800 4. Applications still in process at September 30 were 100% complete as to materials (forms) and 60% complete as to conversion costs $ 1,000 4,000 $ 4,000 12,000 9,400