Question
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
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 (700 units, 3/5 completed): | |
Direct materials (700 $2.35) | $1,645 |
Conversion (700 3/5 $0.30) | 126 |
$1,771 |
The following costs were charged to Work in Process-Sifting Department during July:
Direct materials transferred from Milling Department: | |
15,700 units at $2.45 a unit | $38,465 |
Direct labor | 4,480 |
Factory overhead | 1,022 |
During July, 15,100 units of flour were completed. Work in Process-Sifting Department on July 31 was 1,300 units, 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 equivalent unit answers to two decimal places. |
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 journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered. |
3. | Determine the increase or decrease in the cost per equivalent unit from June to July for direct materials and conversion costs. Enter all amounts as positive numbers. Round your answers to two decimal places. |
4. | Discuss the uses of the cost of production report and the results of part (3). |
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 |
REVENUE | |
410 | Sales |
610 | Interest Revenue |
EXPENSES | |
510 | Cost of Goods Sold |
520 | Wages Expense |
531 | Selling Expense |
532 | Insurance Expense |
533 | Utilities Expense |
534 | Supplies Expense |
540 | Administrative Expense |
561 | Depreciation Expense-Factory |
590 | Miscellaneous Expense |
710 | Interest Expense |
1. Prepare a cost of production report for the Sifting Department for July. If an amount is zero, enter "0". Round your Cost per equivalent unit answers to two decimal places.
WHITE DIAMOND FLOUR COMPANY | |||
Cost of Production Report-Sifting Department | |||
For the Month Ended July 31 | |||
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 (3/5 completed) | |||
Started and completed in July | |||
Transferred to Packaging Department in July | |||
Inventory in process, July 31 (4/5 completed) | |||
Total units to be assigned costs |
COSTS | Costs | ||
Direct Materials | Conversion | Total | |
Cost 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 | |||
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 journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.
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JOURNAL
ACCOUNTING EQUATION
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3. Determine the increase or decrease in the cost per equivalent unit from June to July for direct materials and conversion costs. Enter all amounts as positive numbers. Round your answers to two decimal places.
Direct materials: | $ |
Conversion: | $ |
4. The cost of production report may be used as the basis for allocating product costs between Work in Process or Direct Materials and Transferred-Out (Finished) Goods / Cost of Sold. 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.
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