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, 45 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).

HART 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 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”. 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 COSTS Costs Direct Materials Conversion Total Costs 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 Cost 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 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. PAGE 10 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 2 3 4 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. Direct materials: Conversion:

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	15700
Total unit to be accounted for	16400
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 0% Conversion - 2/5	700	0	280
Started and completed currently	14400	14400	14400
Units in ending WIP Material - 100% Conversion - 4/5	1300	1300	1040
Total units accounted for	16400	15700	15720

White Diamond Flour Company
Sifting Department
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$43,967.00	$38,465.00	$5,502.00
Equivalent units		15700	15720
Cost per equivalent unit		$2.45	$0.35

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	$1,771	$1,645	$126
Current cost added to complete beginning WIP:
Material	$0	$0
Conversion (2800 * $0.35)	$98		$98
Total Cost from beginning inventory	$1,869	$1,645	$224
Current cost of unit started and completed:
Material (14400*$2.45)	$35,280	$35,280
Conversion (14400*$0.35)	$5,040		$5,040
Total cost of unit started and completed	$40,320	$35,280	$5,040
Total cost of unit transferred out	$42,189	$36,925	$5,264
Cost assigned to ending WIP:
Material (1300*$2.45)	$3,185	$3,185
Conversion (1040*$0.35)	$364		$364
Total ending WIP inventory	$3,549	$3,185	$364
Total cost accounted for	$45,738	$40,110	$5,628

Solution 2:

Journal Entries - White Diamond Flour Company
Date	Particulars	Debit	Credit
July	Work In Process - Sifting Department Dr	$38,465.00
	To Work In Process - Milling Department		$38,465.00
	(Being cost transferred from milling to sifting department)
July	Work In Process - Packaging Department Dr	$42,189.00
	To Work In Process - Sifting Department		$42,189.00
	(Being cost transferred from sifting to packaging department)

Solution 3:

Change in cost per equivalent unit of direct material from june to july = $2.45 - $2.35 = $0.10 increase

Change in cost per equivalent unit of conversion from june to july = $0.35 - $2.30 = $0.05 increase