Complete five-step process in last department (Learning Objectives 2, 4)

Waterwise 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.

Waterwise’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 trans¬ ferred out of the Testing Department.
Requirements 1. Draw a time line for the Testing Department similar to the one in Exhibit 4-10.
2. Use the time line to compute the number of equivalent units of work performed by the Testing Department during the period, the cost per equivalent unit, and total costs to account for.
3. Assign total costs to

(a) units completed and transferred out of the Testing Department and

(b) units in the Testing Department’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 this cost?

Transcribed Image Text:

Units: Beginning work in process........ 2,000 units Transferred in from the Assembling Department during the period............ 7,000 units Completed during the period... 4,000 units Ending work in process (40% complete as to conversion work) ................. 5,000 units Costs: Beginning work in process (transferred-in costs, $93,000; conversion costs, $18,000) $111,000 Transferred in from the Assembling Department during the period.......... 672,000 Conversion costs added during the period.......... 48,000