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. Other process costing information follows:

The cost transferred into Finished Goods Inventory is the cost of the lifts transferred out of the Testing Department. Waterwise uses weighted-average process costing.

Required

1. Draw a time line for the Testing Department, similar to the one in Exhibit 21-10.

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 cost 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?

 

Appendix Assignments