UNITS 2,000 units Beginning Work-in-Process Inventory Transferred in from Assembling Department during the period Completed during the period Ending Work-in-Process Inventory (40% complete for conversion 7,000 units 4,000 units 5,000 units work) COSTS $111,000 Beginning Work-in-Process Inventory (transferred in costs, $93,000; conversion costs, $18,000) 672,000 Transferred in from the Assembly Department during the period 54,000 Conversion costs added during the period

Preparing production cost report, second department with beginning WIP; decision making

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

Ocean Worthy’s Testing Department requires no direct materials. Conversion costs are incurred evenly throughout the testing process. Other information follows for the month of August:

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

Requirements

1. Prepare a production cost report for the Testing Department.
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?