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
(900 units, 3/5 completed):
Direct materials (900 × $2.05)	$1,845
Conversion (900 × 3/5 × $0.40)	216
	$2,061

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

Direct materials transferred from Milling Department:
15,700 units at $2.15 a unit	$33,755
Direct labor	4,420
Factory overhead	2,708

During July, 15,500 units of flour were completed. Work in Process-Sifting Department on July 31 was 1,100 units, 4/5 completed.

	Required:
1.	Prepare a cost of production report for the Sifting Department for July. If an amount is zero, enter "0". Round your cost per unit answers to the nearest cent.
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 the exact wording of the account titles. CNOW journals do not use lines for spaces or journal explanations. Every line on a journal page is used for debit or credit entries. Do not add explanations or skip a line between journal entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. Use the date July 31 for all journal entries.
3.	Determine the increase or decrease in the cost per equivalent unit from June to July for direct materials and conversion costs. Round your answers to the nearest cent.
4.	Discuss the uses of the cost of production report and the results of part (3). Cost of Production Report Shaded cells have feedback. WHITE DIAMOND FLOUR COMPANY Cost of Production Report-Sifting Department For the Month Ended July 31 Equivalent Units UNITS Whole Units Direct Materials Conversion Units charged to production: Inventory in process, July 1 900 Received from Milling Department Total units accounted for by the Sifting Department Units to be assigned costs: Inventory in process, July 1 (3/5 completed) Started and completed in July Transferred to Packaging Department in July Inventory in process, July 31 (4/5 completed) Total units to be assigned costs Points: 1/18 Eondback

Answer 1

1) WHITE DIAMOND FLOUR COMPANY Cost of Production Report - Sifting Department For the Month Ended July 31 Unit Information Units charged to production: Inventory in proces, July 1 900 Transferred in from Milling Department 15,700 Total units accounted for by the Sifting department 16,600 Units to be assigned costs: Inventory in proces, July 1 Started and Completed in July Transferred to packing department in July Inventory in proces, July 31 Total units to be assigned costs Equivalent Units Whole Transferre Conversion Units d 900 0 360 14,600 14,600 14,600 15,500 14,600 14,960 1,100 1,100 880 16,600 15,700 15,840

Cost Information Conversion Total cost for July in Sifting department Total Equivalent units Cost per equivalent unit Transferred In $33,755 15,700 $2.15 $7,128 15,840 $0.45 Costs assigned to production: Transferred In Conversion Total $2,061 $33,755 [Material cost] $7,128 [Conversion costs] $42,944 Inventory in proces, July 1 Costs transferred in from Milling department in July Costs incurred in Sifting department in July Total costs accounted for by the Sifting department Costs allocated to completed and partially completed units: Inventory in proces, July 1 To complete inventory in process, July 1 Cost of completed July 1 work in process Started and completed in July Transferred to Finished goods in July Inventory in proces, July 31 Total costs assigned by the Sifting department $0 $162 $31,390 $6,570 $2,061 [Given] $162 [360 units x $0.45] $2,223 $37,960 [Ref: Workings] $40,183 $2,761 [Ref: Workings] $42,944 $2,365 $396

2) Credit Event a) Debit $33,755 $33,755 General Journal Work in Process Inventory - Sifting Department Work in Process Inventory - Milling Department (To record cost of goods transferred from Milling to Sifting Dept.) Finished Goods Inventory Work in Process Inventory - Sifting Department (To record cost of goods trfd. from Sifting Dept. to finished goods) b) $40,183 $40,183 3) Change in direct material cost per equivalent unit Change in conversion cost per equivalent unit Change Increase Increase Amount $0.10 $0.05 [Ref: Workings] [Ref: Workings] 4) The cost of production report may be used as the basis for allocating product costs between Work in Process and Transferred-Out. 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.......... difference investigated. Workings: Under FIFO method, equivalent units would consist efforts required to complete the beginning inventory, efforts put for completed and transferred out goods and ending inventory. As the materials are introduced at the beginning itself, beginning inventory is 100% complete in terms of materials, 0% efforts would be required in current process or period whereas conversion costs would require the uncompleted portion of costs in current process or period. That is, it was complete 3/5 already and so 2/5th efforts would be required in current period.

900 Units in beginning inventory Add: Units transferred in from milling department Less: Units in ending inventory Units completed and transferred out 15,700 -1,100 15,500 --> Of which 900 units shall be from beg. inventory; Bal. 14600 units from current. % EUP- Conversion Conversion Equivalent Units of Production (EUP) % EUP- Whole Particulars Transferred Transferred Units in in Beginning work in process 900 0 0 Started, Completed and transferred 14,600 100% 14,600 Transferred to next process 15,500 14,600 Ending work in process 1,100 100% 1,100 Equivalent Units of Production (EUP) 16,600 15,700 360 2/5 100% [900 units x 0; 900 units x 0.4 (= 2/5)] [14600 units x 100%; 14600 units x 100%] 14,600 14,960 880 15,840 4/5 [1100 units x 100%; 1100 units x 0.8 ( =4/5)] NOTE: As all the materials are trfd. in at the beginning of the process, ending work in process inventory shall consist of 100% of trfd. in for EUP calculation.

Cost per equivalent units of production Transferred in Conversion Cost of beginning work in process Cost transferred in from milling department Total Materials Costs & Conversion Costs Equivalent units of Production (EUP) Cost per Equivalent units of Production Cost per EUP - Previous period Change in EUP between the periods $33,755 $33,755 15,700 $2.15 $2.05 $0.10 Increase [Under FIFO method, it shall not be considered here] $7,128 [Conversion = Direct labor + Overhead = $4,420 +$2,708 = $7,128] $7,128 15,840 [As computed EUP schedule presented above] $0.45 [$33755 / 15700 units = $2.15; $7128 / 15840 units=$0.45] $0.40 [Given] $0.05 [Transferred in = $2.15-$2.05=$0.10; Conversion=$0.45-$0.40=$0.05] Increase Cost of goods completed & transferred EUP Cost per EUP Totals Materials - Beginning cost Conversion - Beginning Cost Cost of goods completed & trfd from beginning $1,845 [Given] $216 [Given] $2,061 360 Conversion - Current Cost to complete beginning WIP Materials - Current Cost Conversion - Current Cost to complete current units Cost of goods completed & trfd from current Total Cost of goods completed & transferred 14,600 14,600 $0.45 $2.15 $0.45 $162 [360 units x $0.45] $31,390 [14600 units x $2.15] $6,570 [14600 units x $0.45] $38,122 $40,183 [$2061 + $38122]

Cost of ending work-in-process EUP Totals Cost per EUP $2.15 $0.45 Materials Conversion Total cost of ending work-in-process 1,100 880 $2,365 [1100 units x $2.15] $396 [880 units x $0.45] $2,761