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
(900 units, 3/5 completed):
Direct materials (900 × $2.05)$1,845
Conversion (900 × 3/5 × $0.40)216
$2,061
The following costs were charged to Work in Process-Sifting Department during July:
Direct materials transferred from Milling Department:
15,700 units at $2.15 a unit$33,755
Direct labor 4,420
Factory overhead 2,708
During July, 15,500 units of flour were completed. Work in Process-Sifting Department on July 31 was 1,100 units, 4/5 completed.
Required:
1.Prepare a cost of production report for the Sifting Department for July. If an amount is zero, enter "0". Round your cost per unit answers to the nearest cent.
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 the exact wording of the account titles. CNOW journals do not use lines for spaces or journal explanations. Every line on a journal page is used for debit or credit entries. Do not add explanations or skip a line between journal entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. Use the date July 31 for all journal entries.
3.Determine the increase or decrease in the cost per equivalent unit from June to July for direct materials and conversion costs. Round your answers to the nearest cent.
4.Discuss the uses of the cost of production report and the results of part (3)

White Diamond Flour Company

Sifting Department

1. Cost of Production Report for July

                                             Direct Materials      Conversion             Total

Beginning WIP                     900        $1,845               $216 (3/5)      $2,061

Transferred from Milling 15,700       33,755              7,128               40,883

Total costs of production               $35,600           $7,344            $42,944

Equivalent units of production:

Completed                      15,500     15,500            15,500  

Ending WIP                        1,100         1,100                 880 (4/5)

Total equivalent units                     16,600            16,380

Cost per equivalent unit:

Total costs of production               $35,600           $7,344

Total equivalent units                       16,600            16,380

Cost per equivalent unit                   $2.14               $0.45

Cost Assigned To:

Units transferred to packaging $33,170 (15,500*$2.14) $6,975 (15,500*$0.45)  Total amount = $40,145

Ending WIP $2,354 (1,100*$2,14) + $396 (880*$0.45) = $2,750

2. Journal Entries:

Debit Work-in-Process - Sifting $40,833

Credit Finished Units- Milling $40,833

Debit Work-in-Process - Packaging $40,145

Credit Work-in-Process - Sifting $40,145

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

                                                          Direct Materials  Conversion

July Cost per equivalent unit                $2.14                  $0.45

June Cost per equivalent unit              $2.05                 $0.40

Difference between July and June      $0.09                $0.05

4. The Cost of Production Report helps management to know, for any period, the actual cost of production in each department and to identify the costs of units transferred to the Packaging Department and the costs of units under process in the Sifting Department at the end of the period.  Determining the increase or decrease in cost per equivalent unit also enables management to know whether cost has increased or decreased per unit of production in order to institute appropriate controls for the acquisition of materials, labor, and other production expenses.

Explanation:

a) Data and Calculations:

Work in Process-Sifting Department

(900 units, 3/5 completed):

Direct materials (900 at  $2.05) $1,845

Conversion (900 at 3/5 at $0.40)   216

Total balance                              $2,061

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