White Diamond Flour Company manufactures flour by a series of three processes, beginning with wheat grain...

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Answer 1

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1. Cost of production report for the Sifting Department for July:

	Physical units	D. Material	Conversion cost	Total
WIP Opening	900	-	360 (2/5)
Units introduced & completed	14600	14600	14600
Units transferred to Packaging	15500
WIP Closing	1100	1100	880 (4/5)
Equivalent units		15700	15840
Cost incurred / transferred in		$33755	$7128
Unit cost per unit		$2.15	$0.45
Cost of Opening WIP		1845	216	2061
Added cost during month		-	162	162
Total cost of Opening WIP				2223
Cost of unit intro & completed		14600*2.15=31390	14600*0.45=6570	37960
Total cost of transfer out				$40183
Cost of Closing WIP		2365	396	$2761

2. Journal Entries:

Debit D. Material Inventory $33755

Credit Milling Department $33755

(being the D. Material moved from Milling Department to the Sifting Department)

Debit Packaging Department $40183

Credit Finished Goods Inventory $40183

(being the Finished goods transferred to Packaging Department)

3) Equivalent Unit cost of D. Material = June = $2.05 July=$2.15 Increase = $0.10

Equivalent Unit cost of conversion = June = $0.40 July=$0.45 Increase = $0.05

4) The uses of the cost of production report and the getting the details of the equivalent unit cost of Direct Material and Conversion Costs is that

i. The cost of equivalent unit is known.

ii. The final cost of Opening WIP is calculated.

iii. The cost of the transferred out units cost is made available accurately.

iv. The cost of the of Closing WIP is estimated with accuracy.

v. The management can control the cost of the inputs by getting the information of per unit cost.

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