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).

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

Points:

17 / 18

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1. Calculate equivalent units for direct materials and conversion 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

Answer 1

solution 1:

White Diamond Flour Company
Sifting Department
Computation of Equivalent unit (FIFO)
Particulars	Physical units	Material	Conversion
Units to be accounted for:
Beginning WIP Inventory	900
Units started this period	15700
Total unit to be accounted for	16600
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 0% Conversion - 2/5	900	0	360
Started and completed currently	14600	14600	14600
Units in ending WIP Material - 100% Conversion - 4/5	1100	1100	880
Total units accounted for	16600	15700	15840

White Diamond Flour Company
Sifting Department
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$40,883.00	$33,755.00	$7,128.00
Equivalent units		15700	15840
Cost per equivalent unit		$2.15	$0.45

White Diamond Flour Company
Sifting Department
Producton cost report - FIFO
Particulars	Total cost	Material	Conversion
Cost Accounted for :
Cost assigned to unit transferred out:
Cost from beginning WIP Inventory	$2,061	$1,845	$216
Current cost added to complete beginning WIP:
Material	$0	$0
Conversion (360 * $0.45)	$162		$162
Total Cost from beginning inventory	$2,223	$1,845	$378
Current cost of unit started and completed:
Material (14600*$2.15)	$31,390	$31,390
Conversion (14600*$0.45)	$6,570		$6,570
Total cost of unit started and completed	$37,960	$31,390	$6,570
Total cost of unit transferred out	$40,183	$33,235	$6,948
Cost assigned to ending WIP:
Material (1100*$2.15)	$2,365	$2,365
Conversion (880*$0.45)	$396		$396
Total ending WIP inventory	$2,761	$2,365	$396
Total cost accounted for	$42,944	$35,600	$7,344

Solution 2:

Journal Entries - White Diamond Flour Company
Date	Particulars	Debit	Credit
July	Work In Process - Sifting Department Dr	$33,755.00
	To Work In Process - Milling Department		$33,755.00
	(Being cost transferred from milling to sifting department)
July	Work In Process - Packaging Department Dr	$40,183.00
	To Work In Process - Sifting Department		$40,183.00
	(Being cost transferred from sifting to packaging department)

Solution 3:

Particulars	Direct material	Conversion
Cost per equivalent unit:
From current period	$2.15	$0.45
From beginning period	$2.05	$0.40
Increase (decrease)	$0.10	$0.05

Solution 4:

The cost of production report may be used as the basis for allocating product costs between Units completed & Transferred and Units in ending WIP. 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.