why would management be interested in this cost 556794

Computing equivalent units for a second department with beginning work in process inventory; assigning costs to completed units and ending work in process; weighted average method

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:

Units:

Beginning work in process

2,000

units

Transferred in from the Assembling Dept. 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 cost, $93,000;

conversion costs, $18,000)

$ 111,000

Transferred in from the Assembling Dept. during the period

672,000

Conversion costs added during the period

54,000

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.

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 this cost?

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