Problem 3

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 ProcessSifting Department was as follows on July 1, 2016:

Work in ProcessSifting Department )900 units, 3/5 completed):

Direct Materials (900 x $2.05) $1,845

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

$2,061

The following costs were charged to Work in ProcessSifting Department during July:

Direct materials transferred from Milling Department:

15,700 units @ $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 ProcessSifting Department on July 31 was 1,100 units, completed.

Instructions

1. Prepare a cost of production report for the Sifting Department for July.
2. Determine the increase or decrease in the cost per equivalent unit from June to July for direct materials and conversion costs.