Question

White Diamond Flour Company manufactures flour by a series of three processes, beginning with wheat grain being introduced in the Milling Department. From the Milling Department, the materials pass through the Sifting and Packaging departments, emerging as packaged refined flour.

The balance in the account Work in Process-Sifting Department was as follows on July 1:

Work in Process-Sifting Department (750 units, 3/5 completed):
Direct materials (750 × $2.25)	$1,688
Conversion (750 × 3/5 × $0.40)	180
	$1,868

The following costs were charged to Work in Process-Sifting Department during July:

Direct materials transferred from Milling Department:
16,400 units at $2.35 a unit	$38,540
Direct labor	4,480
Factory overhead	2,936

During July, 16,050 units of flour were completed. Work in Process-Sifting Department on July 31 was 1,100 units,    completed.

	Required:
1.	Prepare a cost of production report for the Sifting Department for July. If required, round your cost per equivalent unit answers to two decimal places. If an amount is zero, enter zero “0”.
2.	Journalize the entries for costs transferred from Milling to Sifting and the costs transferred from Sifting to Packaging. Refer to the Chart of Accounts for correct wording of account titles.
3.	Determine the increase or decrease in the cost per equivalent unit from June to July for direct materials and conversion costs. If required, round your answers to two decimal places.
4.	Discuss the uses of the cost of production report and the results of part (3).

Answer 1

Solution:

WHITE DIAMOND FLOUR COMPANY Cost of Production Report-Sifting Department For the Month Ended July 31 UNITS Whole Units Equivalent Units Direct Materials Conversion 750 16400 17150 14 Units charged to production: Inventory in process, July 1 Received from Milling Department Total units accounted for by the Sifting Department Units to be assigned costs: Inventory in process, July 1 (2/5 completed this period) Started and completed in July (16050-750) Transferred to Packaging Department in July Inventory in process, July 31 (4/5 completed) Total units to be assigned costs 400 16 750 15 300 16050 1100 17150 15 300 15 700 17 18 15 3001 15300 1100 16400 880 16580 COSTS Costs Direct Materials Conversion Total ༤ བལe ༈ ༠ ༠ #| $38,540 16400 $2.35 $7,416 165 80 $0.45 $2.80 29 30 $1,868 $45,956 $47,824 31 Cost per equivalent unit: Total costs for July in Sifting Department /Total equivalent units Cost per equivalent unit Costs assigned to production: Inventory in process, July 1 Costs incurred in July Total costs accounted for by the Sifting Department Costs allocated to completed and partially completed units: Inventory in process, July 1-balance To complete inventory in process, July 1 (Equi. Units* cost per Equi. Unit) Cost of completed July 1 work in process Started and completed in July Transferred to Packaging Department in July Inventory in process, July 31 Total costs assigned by the Sifting Department 33 34 $179 $35,955 $6,843 $1,868 $179 $2,047 $42,798 $44,845 $2,979 $47,824 37 $2,585 $394 39 40 41 42 Credit 43 Date 44 31-Jul Journal Entries - White Diamond Flour Company Particulars Work In Process - Sifting Department Dr To Work In Process - Milling Department (Being cost transferred from milling to sifting department) Debit $38,540 45 $38,540 46 47 $44,845 49 Work In Process - Packaging Department Dr To Work In Process - Sifting Department (Being cost transferred from sifting to packaging department) $44,845 Increase/(Decrea Amount Increase Increase Direct Materials ($2.35-2.25) Conversion ($0.45-$0.40) s0,10 $0.06 60 61 et641 ) Sheet642 Sheet119 (8) ) Sheet644 Sheet645

Part 4:

The cost of production report may be used as the basis for allocating production costs between units completed and transferred out and Units in ending work in process. The report can also be used to control costs by holding each department head responsible for the units entering production and the costs incurred in the department. Any difference in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.