Computing equivalent units for a second department with beginning inventory; assigning c...

Computing equivalent units for a second department with beginning inventory; assigning costs to completed units and ending work in process; weighted-average method [50-60 min]

Sea Worthy 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. SeaWorthy’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 transferred out of the Testing Department. SeaWorthy uses weighted-average process costing.

Requirements

1. Draw a time line for the Testing Department.

2. Use the time line to compute the number of equivalent units of work performed by the Testing Department during the period.

3. Compute SeaWorthy’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?