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
(600 units, 3535 completed):
Direct materials (600 $2.25)	$1,350
Conversion (600 3535 $0.40)	144
	$1,494

The following costs were charged to Work in Process-Sifting Department during July:

Direct materials transferred from Milling Department:
15,400 units at $2.35 a unit	$36,190
Direct labor	4,420
Factory overhead	2,474

During July, 14,400 units of flour were completed. Work in Process-Sifting Department on July 31 was 1,600 units, 4545 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).

Chart of Accounts

CHART OF ACCOUNTS

White Diamond Flour Company

General Ledger

	ASSETS
110	Cash
121	Accounts Receivable
125	Notes Receivable
126	Interest Receivable
131	Materials
141	Work in Process-Milling Department
142	Work in Process-Sifting Department
143	Work in Process-Packaging Department
151	Factory Overhead-Milling Department
152	Factory Overhead-Sifting Department
153	Factory Overhead-Packaging Department
161	Finished Goods
171	Supplies
172	Prepaid Insurance
173	Prepaid Expenses
181	Land
191	Factory
192	Accumulated Depreciation-Factory

	LIABILITIES
210	Accounts Payable
221	Utilities Payable
231	Notes Payable
236	Interest Payable
251	Wages Payable

	EQUITY
311	Common Stock
340	Retained Earnings
351	Dividends
390	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Goods Sold
520	Wages Expense
531	Selling Expenses
532	Insurance Expense
533	Utilities Expense
534	Supplies Expense
540	Administrative Expenses
561	Depreciation Expense-Factory
590	Miscellaneous Expense
710	Interest Expense

Cost of Production Report

1. Prepare a cost of production report for the Sifting Department for July.

WHITE DIAMOND FLOUR COMPANY
Cost of Production Report-Sifting Department
For the Month Ended July 31, 2016
UNITS	Whole Units	Equivalent Units
		Direct Materials	Conversion
Units charged to production:
Inventory in process, July 1
Received from Milling Department
Total units accounted for by the Sifting Department
Units to be assigned costs:
Inventory in process, July 1 (3535 completed)
Started and completed in July
Transferred to Packaging Department in July
Inventory in process, July 31 (4545 completed)
Total units to be assigned costs

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
Costs incurred in July
Total costs accounted for by the Sifting Department
Cost allocated to completed and
partially completed units:
Inventory in process, July 1 balance
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

Journal

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.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2
3
4

Final Questions

3. Determine the increase or decrease in the cost per equivalent unit from June to July for direct materials and conversion costs.

Direct materials:
Conversion:

4. The cost of production report may be used as the basis for allocating product costs between ________ and ________ . The report can also be used to control costs by holding each department head responsible for the units entering production and the costs incurred in the department. Any differences in unit product costs from one month to another, such as those in part (3), can be studied carefully and any significant differences investigated.