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 (900 units, 3/5 completed):
Direct materials (900 $2.05)	$1,845
Conversion (900 3/5 $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, 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).

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 Equivalent Units UNITS Whole 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: 900 5,700V 16,600V 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 900V 14,600V 15,500 1,100V 16,600 4,600V 4,600V 1,100V 15,700V 360V 14,600V 14,960V 880V 15,840V Points:18/18 Feedback V Check My Work 1. Calculate equivalent units for materials and conversion 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 $33,755V 5,700 $2.15V $7,128V 15,840V $0.45 $2,061V 37,960 X $40,183 x $2,061V $162 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 162V $2,223V 37,960V $40,183V 2,761V $42,944V 31,390 6,570 2,365V 396V Points:20/22 Feedback V Check My Work 1. Calculate the cost per equivalent unit for materials and conversion costs. Calculate the costs assigned to the beginning inventory, the units started and completed and the ending inventory. 3. Determine the increase or decrease in the cost per equivalent unit from June to July for direct materials and conversion costs. Increase Increase Direct materials: S Points: 214 4. The cost of production report may be used as the basis for allocating product costs between Work in Processand Transferred-Out (or Finished) Goods 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. K Points: 2/2