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
(800 units, 3/5 completed):
Direct materials (800 × $2.25)	$1,800
Conversion (800 × 3/5 × $0.40)	192
	$1,992

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

Direct materials transferred from Milling Department:
16,400 units at $2.35 a unit	$38,540
Direct labor	4,480
Factory overhead	2,945

During July, 16,100 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).

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			800
Received from Milling department			16400
Total units accounted for by the Sifting Department			17200
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, July 1	800	0	320
Started and completed in July	15300	15300	15300
Transferred to Packaging Department in July	16100	15300	15620
Inventory in process, July 31	1100	1100	880
Total units to be assigned costs	17200	16400	16500
Cost Information
Costs per equivalent unit:
		Direct Materials	Conversion
Total costs for July in Sifting Department		38540	7425
Total equivalent units		16400	16500
Cost per equivalent unit		2.35	0.45
Costs charged to production:
	Direct Materials	Conversion	Total
Inventory in process, July 1			1992
Costs incurred in July			45965
Total costs accounted for by the Sifting Department			47957
Cost allocated to completed and partially completed units:
Inventory in process, July 1 balance			1992
To complete inventory in process, July 1	0	144	144
Cost of completed July 1 work in process			2136
Started and completed in July	35955	6885	42840
Transferred to Packaging Department in July			44976
Inventory in process, July 31	2585	396	2981
Total costs assigned by the Sifting Department			47957
2
Description	Debit	Credit	Assets	Liabilities	Equity
July 31   Work in Process-Sifting Department	38540		↑
Work in Process-Milling Department		38540	↓
July 31 Work in Process-Packaging Department	44976		↑
Work in Process-Sifting Department		44976	↓
3
	Increase or Decrease	Amount
Change in direct materials cost per equivalent unit	Increase	0.10	=2.35-2.25
Change in conversion cost per equivalent unit	Increase	0.05	=0.45-0.40
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.