Chapter 20, Problem P20.40BPGB

Preparing a production cost report, second department with beginning W1P; decision making

Lake Bound uses three processes to manufacture lifts for personal watercrafts: forming a lift’s parts from galvanized steel, assembling the lift, and testing the completed lift. The lifts are transferred to finished goods before shipment to materials across the country.

Lake Bound’s Testing Department requires no direct materials. Conversion costs are incurred evenly throughout the testing process. Other information follows for October 2016:

The cost transferred into Finished Goods Inventory is the cost of the lifts transferred

out of the Testing Department. Lake Bound 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 he interested in this cost'