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	32,000	Completed and transferred to Blending	?
Materials	143,600
Direct labor	68,200
Overhead	483,000
March 31 balance	?

The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $7,300; direct labor, $4,100; and overhead, $20,600.

Costs incurred during March in the Blending Department were: materials used, $45,000; direct labor, $16,600; and overhead cost applied to production, $117,000.

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, $696,000. (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, $632,000.
6. Units that were complete with respect to processing in the Blending Department were transferred to Finished Goods, $730,000.
7. Completed units were sold on account, $1,420,000. The Cost of Goods Sold was $630,000.

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	$	214,600
Work in process—Blending Department	$	50,000
Finished goods	$	27,000

Answer 1

1.

	General Journal	Debit	Credit
a	Work in process - Refining	$143,600
	Work in process - Blending	45,000
	Raw material		$188,600
b	Work in process - Refining	$68,200
	Work in process - Blending	16,600
	Wages payable		$84,800
c	Manufacturing overhead	$696,000
	Accounts payable		$696,000
d	Work in process - Refining	$483,000
	Work in process - Blending	117,000
	Manufacturing overhead		$600,000
e	Work in process - Blending	$632,000
	Work in process - Refining		$632,000
f	Finished goods	$730,000
	Work in process - Blending		$730,000
g	Accounts receivable	$1,420,000
	Sales		$1,420,000
h	Cost of goods sold	$630,000
	Finished goods		$630,000

2.

Raw materials	Work in process - Refining
Beg.bal.	$214,600			Beg.bal.	$32,000
		$143,600	a	a	143,600	$632,000	e
		45,000	a	b	68,200
End.bal.	$26,000			c	483,000
				End.bal,	$94,800
Work in process - Blending	Manufacturing Overhead
Beg.bal	$50,000			Beg.bal.	$0
a	45,000	$730,000	f	c	696,000	$483,000	d
b	16,600					117,000	d
c	117,000			End.bal.	$96,000
e	632,000
End.bal	$130,600
Finished Goods	Cost of goods sold
Beg.bal	$27,000			Beg.bal	$0
f	730,000	$630,000	h	h	630,000
End.bal.	$127,000			End.bal.	$630,000
Sales	Accounts receivable
Beg.bal.		$0		Beg.bal.	$0
		1,420,000	g	g	1,420,000
End.bal.		$1,420,000		End.bal	1,420,000
Accounts payable	Wages payable
Beg.bal.		$0		Beg.bal.		$0
		696,000	c			68,200	b
End.bal.		$696,000				16,600	b
				End.bal		$84,800