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, 4/5 completed.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
| 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 |
| Direct materials transferred from Milling Department: | |
| 15,700 units at $2.45 a unit | $38,465 |
| Direct labor | 4,480 |
| Factory |
1,022 |
| 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 unit answers to the nearest cent and final answers to the nearest dollar amount. |
| 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. Use the date July 31 for all |
| 3. | Determine the increase or decrease in the cost per equivalent unit from June to July for direct materials and conversion costs. Round your answers to the nearest cent. |
| 4. | Discuss the uses of the cost of production report and the results of part (3). |
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