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
(1,000 units, 3/5 completed):
Direct materials (1,000 × $2.15)	$2,150
Conversion (1,000 × 3/5 × $0.40)	240
	$2,390

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

Direct materials transferred from Milling Department:
16,700 units at $2.25 a unit	$37,575
Direct labor	4,540
Factory overhead	3,056

During July, 16,600 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 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).

Instructions 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 (1,000 units, 3/5 completed) Direct materials (1,000 x $2.15) $2.150 Conversion (1,000 x 35 0.40 240 $2,390 The following costs were charged to Work in Process-Sifting Department during July Direct materials transferred from Milling Department: 16,700 units at $2.25 a unit Direct labor Factory overhead $37,575 4,540 3,056

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	1000
Units started this period	16700
Total unit to be accounted for	17700
Units Accounted for:
Units completed and transferred out
From beginning inventory Material - 0% Conversion - 2/5	1000	0	400
Started and completed currently	15600	15600	15600
Units in ending WIP Material - 100% Conversion - 4/5	1100	1100	880
Total units accounted for	17700	16700	16880

White Diamond Flour Company
Sifting Department
Computation of Cost per Equivalent unit
Particulars	Total cost	Material	Conversion
Current period cost	$45,171.00	$37,575.00	$7,596.00
Equivalent units		16700	16880
Cost per equivalent unit		$2.25	$0.45

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	$2,390	$2,150	$240
Current cost added to complete beginning WIP:
Material	$0	$0
Conversion (400 * $0.45)	$180		$180
Total Cost from beginning inventory	$2,570	$2,150	$420
Current cost of unit started and completed:
Material (15600*$2.25)	$35,100	$35,100
Conversion (15600*$0.45)	$7,020		$7,020
Total cost of unit started and completed	$42,120	$35,100	$7,020
Total cost of unit transferred out	$44,690	$37,250	$7,440
Cost assigned to ending WIP:
Material (1100*$2.25)	$2,475	$2,475
Conversion (880*$0.45)	$396		$396
Total ending WIP inventory	$2,871	$2,475	$396
Total cost accounted for	$47,561	$39,725	$7,836

Solution 2:

Journal Entries - White Diamond Flour Company
Date	Particulars	Debit	Credit
July	Work In Process - Sifting Department Dr	$37,575.00
	To Work In Process - Milling Department		$37,575.00
	(Being cost transferred from milling to sifting department)
July	Work In Process - Packaging Department Dr	$44,690.00
	To Work In Process - Sifting Department		$44,690.00
	(Being cost transferred from sifting to packaging department)

Solution 3:

Particulars	Direct material	Conversion
Cost per equivalent unit:
From current period	$2.25	$0.45
From beginning period	$2.15	$0.40
Increase (decrease)	$0.10	$0.05

Solution 4:

The cost of production report may be used as the basis for allocating product cost between units completed and Work in process. 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.