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 × $2.15) $1,720 Conversion (800 * 3/5 * $0.50) 240 $1,960 The following costs were charged to Work in Process-Sifting Department during July Direct materials transferred from Milling Department: 15,500 units at $2.25 a unit $34,875 Direct labor 4,540 Factory overhead 4,018

Answer 1

Solution 1:

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	800
Received from Milling Department	15500
Total units accounted for by the Sifting Department	16300
Units to be assigned costs:
Inventory in process, July 1 (2/5 completed this period)	800	0	320
Started and completed in July (15000-800)	14200	14200	14200
Transferred to Packaging Department in July	15000	14200	14520
Inventory in process, July 31 (4/5 completed)	1300	1300	1040
Total units to be assigned costs	16300	15500	15560
COSTS	Costs
	Direct Materials	Conversion	Total
Cost per equivalent unit:
Total costs for July in Sifting Department	$34,875	$8,558
/Total equivalent units	15500	15560
Cost per equivalent unit	$2.25	$0.55	$2.80
Costs assigned to production:
Inventory in process, July 1			$1,960
Costs incurred in July			$43,433
Total costs accounted for by the Sifting Department			$45,393
Costs allocated to completed and partially completed units:
Inventory in process, July 1-balance			$1,960
To complete inventory in process, July 1 (Equi. Units*cost per Equi. Unit)	$0	$176	$176
Cost of completed July 1 work in process			$2,136
Started and completed in July	$31,950	$7,810	$39,760
Transferred to Packaging Department in July			$41,896
Inventory in process, July 31	$2,925	$572	$3,497
Total costs assigned by the Sifting Department			$45,393

Solution 2:

Journal Entries - White Diamond Flour Company
Date	Particulars	Debit	Credit
31-Jul	Work In Process - Sifting Department Dr	$34,875
	To Work In Process - Milling Department		$34,875
	(Being cost transferred from milling to sifting department)
31-Jul	Work In Process - Packaging Department Dr	$41,896
	To Work In Process - Sifting Department		$41,896
	(Being cost transferred from sifting to packaging department)

Solution 3:

	Increase/(Decrease)	Amount
Direct Materials ($2.25-2.15)	Increase	$0.10
Conversion ($0.55-$0.50)	Increase	$0.05

Solution 4:

The cost of production report may be used as the basis for allocating production costs between units completed and transferred out and Units in ending 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 difference in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.