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 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).

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

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			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

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.

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. Round your answers to the nearest cent.

Direct materials:
Conversion:

4. Discuss the uses of the cost of production report and the results of part (3). 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

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:

Particulars	Direct material	Conversion
Cost per equivalent unit:
From current period	$2.15	$0.55
From beginning period	$2.05	$0.50
Increase (decrease)	$0.10	$0.05

Solution 4:

The cost of production report may be used as the basis for allocating product costs between Units completed & Transferred and Units in ending WIP. 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.