WaterBound uses three processes to manufacture lifts for personal watercraft: forming a lift's parts from galvanized steel, assembling the lift, and testing the completed lifts. The lifts are transferred to finished goods before shipment to marinas across the country. WaterBound's Testing Department requires no direct materials. Conversion costs are incurred evenly throughout the testing process. Other information follows: The cost transferred into Finished goods inventory is the cost of the lifts transferred out of the Testing Department. WaterBound uses weighted-average process costing.
Units:
Begining W. I.P 2000 units
Transferred in from Assembling deprtt. 7000
Completes during period 4000
Ending W. I.P 40% completed 5000
Costs:
Begining W. I.P transferred in cost 93000
conversion cost 18000
11000
Transferred in from assembling department 672000
Conversion cost added during period 54000
Requirements
1. Draw a timeline for the Testing Department.
2. Use the timeline to compute the number of equivalent units of work performed by the Testing Department during the period.
3. Compute WaterBound's transferred-in and conversion costs per equivalent unit. Use the unit costs to assign total costs to (a) units completed and transferred out of Testing and (b) units in Testing's ending Work in process inventory.
4. Compute the cost per unit for lifts completed and transferred out to Finished goods inventory. Why would management be interested in thiscost?