The lifts are transferred to the Finished Goods Inventory before shipment to marinas across the country.

OceanBound's

Testing Department requires no direct materials. Conversion costs are incurred evenly throughout the testing process. Other information follows for the month of

August:

UNITS
Beginning Work-in-Process Inventory	1,500 units
Transferred in from Assembling Department during the period	7,200 units
Completed during the period	3,900 units
Ending Work-in-Process Inventory (40% complete for conversion work)	4,800 units
COSTS
Beginning Work-in-Process Inventory (transferred in costs, $96,000; conversion cost, $17,000)	$113,000
Transferred in from the Assembly Department during the period	660,900
Conversion costs added during the period	58,660

OceanBound

uses three processes to manufacture lifts for personal watercraft: forming a lift's parts from galvanized steel, assembling the lift, and testing the completed lift.

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Part 1

The cost transferred into Finished Goods Inventory is the cost of the lifts transferred out of the Testing Department.

OceanBound

uses the weighted-average method.Read the requirements

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Part 1

Requirement 1. Prepare a production cost report for the Testing Department. (Round all cost per unit amounts to the nearest cent and all other amounts to the nearest whole dollar. Abbreviation used: EUP = equivalent units of production.)

OceanBound
Production Cost Report-Testing Department
Month Ended August 31
		Equivalent Units
	Physical	Transferred	Direct	Conversion
UNITS	Units	In	Materials	Costs
Units to account for:
Total units to account for
Units accounted for:
			n/a
			n/a
Total units accounted for			n/a

Part 2

		Transferred	Direct	Conversion	Total
COSTS		In	Materials	Costs	Costs
Costs to account for:
			n/a
			n/a
Total costs to account for			n/a
			n/a
Cost per equivalent unit			n/a

Part 3

Costs accounted for:
		n/a
		n/a
Total costs accounted for		n/a

Part 4

Requirement 2. What is the cost per unit for lifts completed and transferred out to Finished Goods Inventory? Why would management be interested in this cost?

The cost per unit for lifts completed and transferred out to Finished Goods Inventory is

per lift.

Part 5

Why would management be interested in the cost per unit for lifts completed and transferred out to Finished Goods Inventory?

A.Managers use the cost per lift for external financial

reportingspecifically

to calculate the Cost of Goods Sold on the Income Statement.

B.

Managers would compare the average cost per lift against their budgeted costs to determine whether the costs of the Testing Department remain under control. If budgeted costs are higher than the actual average cost per lift, then the managers have done a good job controlling costs. In contrast, if the budgeted costs are lower than the actual average cost per lift, managers will investigate the reason for the higher-than-expected costs in an effort to regain control over costs.

C.Managers use the cost per lift for external financial

reportingspecifically

to calculate the ending inventory balances on the Balance Sheet.

D.

All of the above are reasons why management would be interested in this cost per unit for lifts completed and transferred out to Finished Goods Inventory.