(Appendix) Shrinkage in a Process Cost System with a Fifo Cost Flow Assumption. XXX Chemicals Company produces a single product in two departments, Distillation and Refining. Unrefined chemicals are mixed and then subjected to a heating process in the Distillation Department, after which the product is transferred to the Refining Department, where the liquid mixture is filtered and put in drums for storage and transport. Because of the heat applied to the product in both departments, some production shrinkage occurs, which is viewed as part of the normal production process by management and not measured. Data related to operations during the month ofJune are: LO6 Distillation Refining Units in beginning inventory:

Distillation Department (100% materials, 20% labor and overhead). 4,000 Refining Department (100% materials, 50% labor and overhead). ' 2,000 Units started in process in Distillation Department thisperiod. 16,000 Units transferred from Distillation Department to Refining Department. 14,000 14,000 Units transferred to the Finished Goods Inventory thisperiod. 12,000 Units in ending inventory:

Distillation Department (100% materials, 80% labor and overhead). 2,000 Refining Department (100% materials, 30% labor and overhead). 2,000 Cost in beginning inventory:

Cost from precedingdepartment. $ 3,500 Materials. $ 3,624 240 Labor. 96 160 Factoryoverhead. 480 900 Cost added during the current period:

Materials. 10,800 1,440 Labor. 1,480 1,740 Factoryoverhead. 7,400 10,440 Required:

(1) Assuming the company uses a process cost system with a fifo cost flow assumption, prepare a June cost of production report for each department.

(2) Assuming the company uses separate ledger accounts for each production department, prepare the appro¬ priate general journal entry to record the transfer of cost out of each department during June.