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 × $2.05)	$1,435
Conversion (700 × 3/5 × $0.50)	210
	$1,645

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

Direct materials transferred from Milling Department:
17,800 units at $2.15 a unit	$38,270
Direct labor	4,440
Factory overhead	5,339

During July, 17,000 units of flour were completed. Work in Process-Sifting Department on July 31 was 1,500 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 correct wording of account titles. 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

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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

Points:

18 / 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

Points:

7 / 22

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1. Calculate the cost per equivalent unit for direct materials and conversion costs. Calculate the costs assigned to the beginning inventory, the units started and completed, and the ending inventory.

Journal

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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. Use the date July 31 for all journal entries.

How does grading work?

PAGE 10

JOURNAL

Score: 33/51

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1	✔	✔
2		✔
3	✔	✔
4		✔

Points:

6.47 / 10

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2. Remember that there are three types of inventory: materials, work in process, and finished goods. What costs are captured in the work in process account? Are these units 100% complete or are they being transferred to another 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	700
Units started this period	17800
Total unit to be accounted for	18500
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 0% Conversion - 2/5	700	0	280
Started and completed currently	16300	16300	16300
Units in ending WIP Material - 100% Conversion - 4/5	1500	1500	1200
Total units accounted for	18500	17800	17780

White Diamond Flour Company
Sifting Department
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$48,049.00	$38,270.00	$9,779.00
Equivalent units		17800	17780
Cost per equivalent unit		$2.15	$0.55

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	$1,645	$1,435	$210
Current cost added to complete beginning WIP:
Material	$0	$0
Conversion (280 * $0.55)	$154		$154
Total Cost from beginning inventory	$1,799	$1,435	$364
Current cost of unit started and completed:
Material (16300*$2.15)	$35,045	$35,045
Conversion (16300*$0.55)	$8,965		$8,965
Total cost of unit started and completed	$44,010	$35,045	$8,965
Total cost of unit transferred out	$45,809	$36,480	$9,329
Cost assigned to ending WIP:
Material (1500*$2.15)	$3,225	$3,225
Conversion (1200*$0.55)	$660		$660
Total ending WIP inventory	$3,885	$3,225	$660
Total cost accounted for	$49,694	$39,705	$9,989

Solution 2:

Journal Entries - White Diamond Flour Company
Date	Particulars	Debit	Credit
July	Work In Process - Sifting Department Dr	$38,270.00
	To Work In Process - Milling Department		$38,270.00
	(Being cost transferred from milling to sifting department)
July	Work In Process - Packaging Department Dr	$45,809.00
	To Work In Process - Sifting Department		$45,809.00
	(Being cost transferred from sifting to packaging department)

Solution 3:

Increase or decrease in cost per equivalent unit of material from june to july = $2.15 - $2.05 = $0.10 increase

Increase or decrease in cost per equivalent unit of conversion from june to july = $0.55 - $0.50 = $0.05 increase

Solution 4:

The cost production report is used to identify the cost of unit completed & Transferred out and cost of ending work in process. Further cost of production report helps in comparision of cost per previous period to current period as done in part 3 and it helps the manager to investigate differences for increase or decrease in cost.