WHITE DIAMOND FLOUR COMPANY Cost of Production Report - Sifting Department For t

Question

WHITE DIAMOND FLOUR COMPANY Cost of Production Report - Sifting Department For the Month Ended July 31, 2016 UNITS Equivalent Units Whole Units Direct Materials Conversion Units charged to production: Inventory in process, July 1 900 Received from Milling Department 15700 Total units accounted for by the Sifting Department 16,600 Units to be assigned cost: Inventory in process, July 1 ( 60% complete) 900 Started and completed in July Transferred to Packaging Department in July Inventory in process, July 31 ( 80% complete) Total units to be assigned cost 16,600 15,700 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 $2,061 Costs incurred in July 40,883 Total costs accounted for by the Sifting Department 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 (900 units, completed): Direct materials (900 × $2.05) $1,845 Conversion (900 × × $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, 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 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) Costs allocated to completed and partially completed units: Inventory in process, July 1 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 Direct Materials Conversion Cost per equivalent unit: From current period From beginning inventory Increase (decrease)

Explanation / Answer

Question 1. Direct Material Conversion cost Units Conversion EQ.Units Conversion EQ.Units Beginning 900 100% 900 60% 540 Received from Milling dept 15700 100% 15700 100% 15700 Units to Account for 16600 16600 16240 Completed 15500 100% 15500 100% 15500 Ending WIP inventory 1100 100% 1100 80% 880 16600 16600 16380 Costs: Beginning WIP Inventory 1845 216 Cost Incurred 33755 7128 Total cost Accounted for 35600 7344 Cost per Equivalent Units 2.14 0.45 Production Report: Beginning WIP Inventory 900 2061 Received From Milling Department 15700 40883 Total Cost to Accounted for 16600 42944 Units finishd and transferred Material 15500 33240.96 Conversion 6949.45 Total 40190.41 Ending WIP Inventory Material 1100 2359.04 Conversion 394.55 Total 2753.59 Total Cost Accounted for 42944.00 Question 2. Shifting Department 33755 Milling Department 33755 Packing Department 40190.41 Milling Department 40190.41 Question 3. Cost of Beginning WIP inventory 2061 Equivalent of Beginning WIP Inventory 540 Beginning Conversion cost per unit 3.82 Ending WIP inventory 2753.59 Ending Equivalent WIP inventory 880 Ending Cost per unit 3.13 Decrease in rate per unit 0.69 Question 4. Production report is useful for many reason: 1. it tells us the exact cost per unit of production. 2. it reports Ending inventory cost.

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