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
(700 units, 3/5 completed):
Direct materials (700 × $2.35)	$1,645
Conversion (700 × 3/5 × $0.30)	126
	$1,771

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

Direct materials transferred from Milling Department:
15,700 units at $2.45 a unit	$38,465
Direct labor	4,480
Factory overhead	1,022

During July, 15,100 units of flour were completed. Work in Process-Sifting Department on July 31 was 1,300 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).

X

Cost of Production Report

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	700
Received from Milling Department	15700
Total units accounted for by the Sifting Department	16400
Units to be assigned costs:
Inventory in process, July 1 (2/5 completed this period)	700	0	280
Started and completed in July (15100-700)	14400	14400	14400
Transferred to Packaging Department in July	15100	14400	14680
Inventory in process, July 31 (4/5 completed)	1300	1300	1040
Total units to be assigned costs	16400	15700	15720
COSTS	Costs
Direct Materials	Conversion	Total
Cost per equivalent unit:
Total costs for July in Sifting Department	$38,465	$5,502
/Total equivalent units	15700	15720
Cost per equivalent unit	$2.45	$0.35	$2.80
Costs assigned to production:
Inventory in process, July 1			$1,771
Costs incurred in July			$43,967
Total costs accounted for by the Sifting Department			$45,738
Costs allocated to completed and partially completed units:
Inventory in process, July 1-balance			$1,771
To complete inventory in process, July 1 (Equi. Units*cost per Equi. Unit)	$0	$98	$98
Cost of completed July 1 work in process			$1,869
Started and completed in July	$35,280	$5,040	$40,320
Transferred to Packaging Department in July			$42,189
Inventory in process, July 31	$3,185	$364	$3,549
Total costs assigned by the Sifting Department			$45,738

2.

Journal Entries - White Diamond Flour Company
Date	Particulars	Debit	Credit
31-Jul	Work In Process - Sifting Department Dr	$38,465
	To Work In Process - Milling Department		$38,465
	(Being cost transferred from milling to sifting department)
31-Jul	Work In Process - Packaging Department Dr	$42,189
	To Work In Process - Sifting Department		$42,189
	(Being cost transferred from sifting to packaging department)

3.

	Increase/(Decrease)	Amount
Direct Materials ($2.45-2.35)	Increase	$0.10
Conversion ($0.35-$0.30)	Increase	$0.05

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.