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,    completed.

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

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
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
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

1.) Preparation of cost of production report for the Sifting Department

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	15,700
Total unit to be accounted for	16,400
Units Accounted for:
Units completed and transferred out
From beginning inventory
Material - 0%
Conversion - 2/5	700	0	280
Started and completed currently	14,400	14,400	14,400
Units in ending WIP
Material - 100%
Conversion - 4/5	1,300	1,300	1,040
Total units accounted for	16,400	15,700	15,720

White Diamond Flour Company Sifting Department Computation of Cost per Equivalent unit
Particulars	Total Cost	Material	Conversion
Current period cost	43967	38,465	5,502
Equivalent units		15,700	15,720
Cost per equivalent unit		$2.45	$0.35

White Diamond Flour Company Sifting Department Production 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 (280 * $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

2.) JOURNAL ENTRIES

DATE	ACCOUNT TITLE AND EXPLANATION	DEBIT $	CREDIT $
July	Work In Process - Sifting Department	38,465
	Work In Process - Milling Department		38,465
	(Being cost transferred from milling to sifting department)
July	Work In Process - Packaging Department	42,189
	Work In Process - Sifting Department		42,189
	(Being cost transferred from sifting to packaging department)

3.) The increase or decrease in the cost per equivalent unit

Particulars	Direct Material	Conversion
Cost per equivalent unit:
From current period	2.45	0.35
From beginning period	2.35	0.30
Increase or (decrease)	0.10	0.05

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