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
(1,000 units, 3/5 completed):
Direct materials (1,000 × $2.15)	$2,150
Conversion (1,000 × 3/5 × $0.40)	240
	$2,390

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

Direct materials transferred from Milling Department:
16,700 units at $2.25 a unit	$37,575
Direct labor	4,540
Factory overhead	3,056

During July, 16,600 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 and final answers to the nearest dollar amount.
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).

CHART OF ACCOUNTSWhite Diamond Flour CompanyGeneral Ledger

	ASSETS
110	Cash
121	Accounts Receivable
125	Notes Receivable
126	Interest Receivable
131	Materials
141	Work in Process-Milling Department
142	Work in Process-Sifting Department
143	Work in Process-Packaging Department
151	Factory Overhead-Milling Department
152	Factory Overhead-Sifting Department
153	Factory Overhead-Packaging Department
161	Finished Goods
171	Supplies
172	Prepaid Insurance
173	Prepaid Expenses
181	Land
191	Factory
192	Accumulated Depreciation-Factory

	LIABILITIES
210	Accounts Payable
221	Utilities Payable
231	Notes Payable
236	Interest Payable
251	Wages Payable

	EQUITY
311	Common Stock
340	Retained Earnings
351	Dividends
390	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Goods Sold
520	Wages Expense
531	Selling Expenses
532	Insurance Expense
533	Utilities Expense
534	Supplies Expense
540	Administrative Expenses
561	Depreciation Expense-Factory
590	Miscellaneous Expense
710	Interest Expense

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 and final answers to the nearest dollar amount.

WHITE DIAMOND FLOUR COMPANY
Cost of Production Report-Sifting Department
For the Month Ended July 31
UNITS	Whole Units	Equivalent Units
		Direct Materials	Conversion
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 (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

COSTS	Costs
	Direct Materials	Conversion	Total
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
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

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.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4

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.

Direct materials:
Conversion:

4. Discuss the uses of the cost of production report and the results of part (3).

The cost of production report may be used as the basis for allocating product costs between     and   . 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 differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.

Answer 1

1.

WHITE DIAMOND FLOUR COMPANY
Cost of Production Report - Sifting Department
For the Month Ended July 31
UNITS	Whole Units	Equivalent Units
		Direct Materials	Conversion
Units charged to production:
Inventory in process, July 1	1000
Received from Milling Department	16700
Total units accounted for by the Sifting Department	17700
Units to be assigned costs:
Inventory in process, July 1 (3/5 completed)	1000	0	400
Started and completed in July	15600	15600	15600
Transferred to Packaging Department in July	16600	15600	16000
Inventory in process, July 31 (4/5 completed)	1100	1100	880
Total units to be assigned costs	17700	16700	16880
COSTS	Costs
	Direct Materials	Conversion	Total
Costs per equivalent unit:
Total costs for July in Sifting Department	37575	7596	45171
Total equivalent units	16700	16880
Cost per equivalent unit	2.25	0.45	2.70
Costs assigned to production:
Inventory in process, July 1	2150	240	2390
Costs incurred in July	37575	7596	45171
Total costs accounted for by the Sifting Department	39725	7836	47561
Cost allocated to completed and partially completed units:
Inventory in process, July 1 balance	2150	240	2390
To complete inventory in process, July 1	0	180	180
Cost of completed July 1 work in process	2150	420	2570
Started and completed in July	35100	7020	42120
Transferred to Packaging Department in July	37250	7440	44690
Inventory in process, July 31	2475	396	2871
Total costs assigned by the Sifting Department	39725	7836	47561

2.

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1	July 31	Work in Process-Sifting Department		37575		37575
2		Work in Process-Milling Department			37575	-37575
3	July 31	Work in Process-Packaging Department		44690		44690
4		Work in Process-Sifting Department			44690	-44690

3.

Direct materials ($2.25 - $2.15)	$         0.10	Increase
Conversion ($0.45 - $0.40)	$         0.05	Increase

4. The cost of production report may be used as the basis for allocating product costs between units completed 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 differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.

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