Question

Lubricants, Inc., produces a special kind of grease that is widely used by race car drivers. The grease is produced in two processing departments—Refining and Blending. Raw materials are introduced at various points in the Refining Department.

The following incomplete Work in Process account is available for the Refining Department for March:

Work in Process—Refining Department
March 1 balance	34,200	Completed and transferred to Blending	?
Materials	147,600
Direct labor	82,200
Overhead	483,000
March 31 balance	?

The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $8,400; direct labor, $4,100; and overhead, $21,700.

Costs incurred during March in the Blending Department were: materials used, $44,000; direct labor, $17,300; and overhead cost applied to production, $102,000.

Required:

1. Prepare journal entries to record the costs incurred in both the Refining Department and Blending Department during March. Key your entries to the items (a) through (g) below.

1. Raw materials used in production.
2. Direct labor costs incurred.
3. Manufacturing overhead costs incurred for the entire factory, $676,000. (Credit Accounts Payable.)
4. Manufacturing overhead was applied to production using a predetermined overhead rate.
5. Units that were complete with respect to processing in the Refining Department were transferred to the Blending Department, $662,000.
6. Units that were complete with respect to processing in the Blending Department were transferred to Finished Goods, $710,000.
7. Completed units were sold on account, $1,470,000. The Cost of Goods Sold was $680,000.

2. Post the journal entries from (1) above to T-accounts. The following account balances existed at the beginning of March. (The beginning balance in the Refining Department’s Work in Process is given in the T-account shown above.)

Raw materials	$	211,600
Work in process—Blending Department	$	40,000
Finished goods	$	23,000

Answer 1

Part 1

No.	transactions	general journal	debit	credit
1	a	work in process - Refining Department	147600
		Work in process - Blending Department	44000
		Raw materials		191600
2	b	work in process - Refining Department	82200
		Work in process - Blending Department	17300
		Salaries and wages payable		99500
3	c	manufacturing overhead	676000
		Accounts payable		676000
4	d	work in process - Refining Department	483000
		Work in process - Blending Department	102000
		Manufacturing overhead		585000
5	e	work in process - Blending Department	662000
		Work in process - Refining Department		662000
6	f	finished goods	710000
		Work in process - Blending Department		710000
7	g(1)	accounts receivable	1470000
		Sales		1470000
8	g(2)	cost of goods sold	680000
		Finished goods		680000

Part 2

Accounts receivable

(g)	1470000

Sales

		1470000	(g)

Accounts Payable

		676000	(c)

Salaries and wages payable

		99500	(b)

Cost of goods sold

(b)	680000

Raw materials

Beg balance	211600	191600	(a)
Ending balance	20000

Manufacturing overhead

(c)	676000	585000	(d)
Ending balance	91000

Work in process - Refining Department

Beg. Balance	34200	662000	(e)
(a)	147600
(b)	82200
(d)	483000
Ending balance	85000

Work in process - Blending Department

Beginning balance	40000	710000	(f)
(a)	44000
(b)	17300
(d)	102000
(e)	662000
Ending balance	155300

Finished goods

Beginning balance	23000	680000	(g)
(f)	710000
Ending balance	53000