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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 × $2.05) = | $1,640 |
Conversion (800 ×  × $0.50) |
= 240 |
| $1,880 | |
The following costs were charged to Work in Process-Sifting Department during July:
| Direct materials transferred from Milling Department: | |
| 17,800 units at $2.15 a unit | $38,270 |
| Direct labor | 4,440 |
| Factory overhead | 5,361 |
During July, 17,100 units of flour were completed. Work in Process-Sifting Department on July 31 was 1,500 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 unitThe 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). |
Expert Answer
| FIFO method | ||||
| Beggining units | 800 | Transferred out | 17,100 | |
| Started into production | 17800 | Ending units | 1,500 | |
| 18600 | 18600 | |||
| Equivalent units | Material | Conversion | ||
| Beginning units | 800 | 800 | ||
| Completion in current period | 0% | 40% | ||
| A | 0 | 320 | ||
| Units started and completed | 16300 | 16300 | ||
| Completion | 100% | 100% | ||
| B | 16300 | 16300 | ||
| Ending Units | 1,500 | 1,500 | ||
| Completion | 100% | 80% | ||
| C | 1500 | 1200 | ||
| Total units A+B+C | 17800 | 17820 | ||
| Per unit cost | Cost | Total units | Per unit cost | |
| Material cost | 38270 | 17800 | 2.15 | |
| Conversion cost | 9801 | 17820 | 0.55 | |
| 48071 |
| Cost of goods sold | Material | convertion cost | ||
| Beginning inventory completed | ||||
| Completion | 0% | 40% | ||
| Per unit cost | 2.15 | 0.55 | ||
| Units | 800 | 800 | ||
| Total cost A | 0.00 | 176 | 176 | |
| Units started and completed | ||||
| Completion | 100% | 100% | ||
| Per unit cost | 2.15 | 0.55 | ||
| Units | 16300 | 16300 | ||
| Total cost B | 35045 | 8965 | 44010 | |
| Beginning work in progress C | 1880 | |||
| Total cost A+B+C | 46066 | |||
| Ending work in progress | ||||
| Completion | 100% | 80% | ||
| Per unit cost | 2.15 | 0.55 | ||
| Units | 1,500 | 1,500 | ||
| Total cost | 3225 | 660 | 3885 | |
| Total cost accounted for | 49951 | |||
3.
| Cost per equivalent unit | Material | Conversion cost |
| For current period | 2.15 | 0.55 |
| For beginning inventory | 2.05 | 0.50 |
| increase (decrease) | 0.1 | 0.05 |
2
Journal entries
Work in progress Packaging department Debit 46066
Work in progress Sifting department credit 46066
