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, 2016:

Work in Process-Sifting Department
(800 units, completed):
Direct materials (800 × $2.15) $1,720
Conversion (800 × × $0.40) 192
$1,912

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 3,020

During July, 16,400 units of flour were completed. Work in Process-Sifting Department on July 31 was 1,100 units, completed.

Required:
1. Prepare a cost of production report for the Sifting Department for July.
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.
3. Determine the increase or decrease in the cost per equivalent unit The rate used to allocate costs between completed and partially completed production. from June to July for direct materials and conversion costs.
4. Discuss the uses of the cost of production report and the results of part (3).

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X Chart of Accounts

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

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X Cost of Production Report 1. Prepare a cost of production report for the Sifting Department for July.

WHITE DIAMOND FLOUR COMPANY
Cost of Production Report-Sifting Department
For the Month Ended July 31, 2016
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 ( completed)
Started and completed in July
Transferred to Packaging Department in July
Inventory in process, July 31 ( completed)
Total units to be assigned costs

Points: Feedback Check My Work Explanation

COSTS Costs
Direct Materials Conversion Total
Costs 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

Points: Feedback Check My Work Explanation none

X Journal 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

1
2
3
4

Solution

1
2
3
4

Points: Feedback Check My Work none

X Final Questions 3. Determine the increase or decrease in the cost per equivalent unit from June to July for direct materials and conversion costs.

Direct materials: selector 1Increase

  • Increase
  • Decrease
Conversion: selector 2Increase

  • Increase
  • Decrease

Points: 4. The cost of production report may be used as the basis for allocating product costs between selector 1Work in Process

  • Work in Process
  • Direct Materials

and selector 2Transferred-Out

  • Transferred-Out
  • Cost of Goods Sold

. 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.