Question

14. 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 (850 units, 3/5 completed):
Direct materials (850 × $2.15)	$1,828
Conversion (850 × 3/5 × $0.50)	255
	$2,083

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

Direct materials transferred from Milling Department:
15,500 units at $2.25 a unit	$34,875
Direct labor	4,540
Factory overhead	4,029

During July, 15,050 units of flour were completed. Work in Process-Sifting Department on July 31 was 1,300 units, 4545 completed.

	Required:
1.	Prepare a cost of production report for the Sifting Department for July. If required, round your cost per equivalent unit answers to two decimal places. If an amount is zero, enter zero “0”.
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.
3.	Determine the increase or decrease in the cost per equivalent unit from June to July for direct materials and conversion costs. If required, round your answers to two decimal places.
4.	Discuss the uses of the cost of production report and the results of part (3).

CHART OF ACCOUNTS
White Diamond Flour Company
General 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	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Goods Sold 520 Wages Expense 531 Selling Expense 532 Insurance Expense 533 Utilities Expense 534 Supplies Expense 540 Administrative Expense 561 Depreciation Expense-Factory 590 Miscellaneous Expense 710 Interest Expense

Answer 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 process, July 1			850
Received from Milling department			15500
Total units accounted for by the Sifting Department			16350
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, July 1	850	0	340
Started and completed in July	14200	14200	14200
Transferred to Packaging Department in July	15050	14200	14540
Inventory in process, July 31	1300	1300	1040
Total units to be assigned costs	16350	15500	15580
Cost Information
Costs per equivalent unit:
		Direct Materials	Conversion
Total costs for July in Sifting Department		34875	8569
Total equivalent units		15500	15580
Cost per equivalent unit		2.25	0.55
Costs charged to production:
	Direct Materials	Conversion	Total
Inventory in process, July 1			2083
Costs incurred in July			43444
Total costs accounted for by the Sifting Department			45527
Cost allocated to completed and partially completed units:
Inventory in process, July 1 balance			2083
To complete inventory in process, July 1	0	187	187
Cost of completed July 1 work in process			2270
Started and completed in July	31950	7810	39760
Transferred to Packaging Department in July			42030
Inventory in process, July 31	2925	572	3497
Total costs assigned by the Sifting Department			45527
2
Description	Debit	Credit	Assets	Liabilities	Equity
July 31   Work in Process-Sifting Department	34875		↑
Work in Process-Milling Department		34875	↓
July 31 Work in Process-Packaging Department	42030		↑
Work in Process-Sifting Department		42030	↓
3
	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit	Increase	0.10	=2.25-2.15
Change in conversion cost per equivalent unit	Increase	0.05	=0.55-0.50
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. 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.