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
(900 units, 3/5 completed):
Direct materials (900 × $2.05)	$1,845
Conversion (900 × 3/5 × $0.40)	216
	$2,061

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

Direct materials transferred from Milling Department:
15,700 units at $2.15 a unit	$33,755
Direct labor	4,420
Factory overhead	2,708

During July, 15,500 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.
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).

Chart of Accounts

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 390 Income Summary	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Goods Sold 520 Wages Expense 531 Selling Expenses 532 Insurance Expense 533 Utilities Expense 534 Supplies Expense 540 Administrative Expenses 561 Depreciation Expense-Factory 590 Miscellaneous Expense 710 Interest Expense

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.

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 materials and conversion 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

Points:

7 / 22

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1. Calculate the cost per equivalent unit for 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.

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PAGE 10

JOURNAL

Score: 0/51

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

Points:

0 / 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?

Final Questions

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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.

Direct materials:
Conversion:

Points:

0 / 4

4. The cost of production report may be used as the basis for allocating product costs between and . 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.

Answer 1

			Whole Units	Material	Conversion
Units charged to production:
Inventory in Process, July 1			900
Received from Milling departmente			15700
Total units accounted fro Sifting deptt.			16600
Units to be assigned cost:
Inventory in Process, July 1			900	0	360
Started and completed			14600	14600	14600
Transferred to Packagin deptt.			15500	14600	14960
Inventory in Process July 31			1100	1100	880
Total Units to be assigned cost			16600	15700	15840
			Material	Conversion	Total
Cost per Equivalent units:
Total cost for July in Sifting deptt.			33755	7128	40883
Total Equivalent units			15700	15840
Cost per Equivalent units:			2.15	0.45	2.6
Cost assigned to production:
Inventory in Process July1			1845	216	2061
Cost incurred in July			33755	7128	40883
Total cost accounted for in Sifting			35600	7344	42944
Cost allocated to completed and
Partially completed units:
Inventory in Process July 1 balance			1845	216	2061
To complete Inventory in process July1			$0	162	162
Cost of completed July 1 WIP			1845	378	2223
Started and completed in July			$31,390.00	6570	37960
Transferred to Packagin deptt.			33235	6948	40183
Inventory in Process July 31			2365	396	2761
Total cost assigned by Sifting deptt.			35600	7344	42944
Req 2.
Journal entries
Date	Description			Debit	Credit
1	Work in process-Sifting Dr.			33755
	Work in process-Milling				33755
2	Work in process-packaging Dr.			40183
	Work in process-Sifting				40183
Req 3.
Direct Material		Increasse in cost (2.15-2.05)			0.1	per unit
Conversion		Increase in cost (0.45-0.40)			0.05	per unit
Req 4.
The cost of production report may be used as the basis for allocating product cost between completed and partially completed unit
The report can also be used to c ontrol cost by holding each department head responsible for the units enteering production and the cost incurred in deptt.
Any difference in unit product cost from one month to another, such as those in part (3) can be studied carefully and any significant difference investgated.