Background

Darwin Water uses three processes to manufacture lifts for personal watercraft: forming a lifts parts from

galvanised steel, assembling the lift, and testing the completed lifts. The lifts are transferred to finished goods

before shipment to marinas across the country.

Darwin Waters 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. Darwin Water uses weighted-average process costing.

REQUIRED:

1. 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. (6 marks)

2. Assign total costs to the units completed and transferred out of the Testing Department, and the units in

the Testing Departments ending work in process inventory. (10 marks)

3. Compute the cost per unit for lifts completed and transferred out to finished goods inventory. Why would

management be interested in this cost? (4 marks)

\begin{tabular}{|l|r|r|} \hline \multicolumn{2}{|l|}{} & \multicolumn{2}{l|}{ Units } \\ \hline Beginning work in process & 2,000 \\ \hline Transferred in from the Assembling Department during the period & & 7,000 \\ \hline Completed during the period & & 4,000 \\ \hline Ending work in process (40\% complete as to conversion work) & & 5,000 \\ \hline Beginning work in process transferred in cost & $93,000 & Costs \\ \hline Conversion cost & $18,000 & \\ \hline \multicolumn{2}{|l|}{ Transferred in from the Assembling Department during the period } & \\ \hline Conversion costs added during the period & $111,000 \\ \hline \end{tabular}