Reference no: EM133119466

Question - 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.

1. Applications in process on March 1,250

2. Applications started in March 1,100

3. Completed applications during March 950

4. Applications still in process at March 31 were 100% complete a to materials (forms) and 75% complete a to conversion costs.

Beginning WIP:

Direct materials $ 2,125

Conversion costs 9,450

March costs:

Direct materials $ 8,000

Direct labor 43,000

Overhead 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.

Required -

(a) Determine the equivalent units of service (production) for materials and conversion costs.

(b) Compute the unit costs and prepare 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?