Lily 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, 2014:
Work in Process—Sifting Department (700 units, 3/5 completed):
Direct materials (700 × $ 2.58) ....... $ 1,806
Conversion (700 × 3/5 × $ 0.55) ....... 231
The following costs were charged to Work in Process—Sifting Department during July:
Direct materials transferred from Milling Department:
12,300 units at $ 2.60 a unit ......$ 31,980
Direct labor ............. 4,670
Factory overhead ........... 2,758
During July, 12,000 units of flour were completed. Work in Process—Sifting Department on July 31 was 1,000 units, 4/ 5 completed.
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.
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).