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	32,300	Completed and transferred to Blending	?
Materials	149,600
Direct labor	65,200
Overhead	485,000
March 31 balance	?

The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $7,500; direct labor, $5,000; and overhead, $19,800.

Costs incurred during March in the Blending Department were: materials used, $45,000; direct labor, $16,200; and overhead cost applied to production, $109,000.

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.

Journal Entry worksheet

A.Raw materials used in production.

B.Direct labor costs incurred.

C.Manufacturing overhead costs incurred for the entire factory, $666,000. (Credit Accounts Payable.)

D.Manufacturing overhead was applied to production using a predetermined overhead rate.

E.Units that were complete with respect to processing in the Refining Department were transferred to the Blending Department, $682,000.

F.Units that were complete with respect to processing in the Blending Department were transferred to Finished Goods, $740,000.

G1 .Completed units were sold on account, $1,330,000.

G2. The Cost of Goods Sold was $620,000.

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	$	212,600
Work in process—Blending Department	$	55,000
Finished goods	$	16,000

Answer 1

Journal entries:
S.no.	Accounts title and explanations				Debit $	Credit $
A.	Work in Process-Refining Dr.				149600
	Work in process-Blending Dr.				45000
	Raw material inventory					194600
B.	Work in Process-Refining Dr.				65200
	Work in process-Blending Dr.				16200
	Wages payable					81400
C.	Manufacturing Overheads Dr.				666000
	Accounts payable					666000
D.	Work in Process-Refining Dr.				485000
	Work in process-Blending Dr.				109000
	Manufacturing Overheads					594000
E.	Work in Process-Blending Dr.				682000
	Work in process-Refining					682000
F.	Finished Goods Dr.				740000
	Work in process-Blending					740000
G1.	Accounts receivable Dr.				1330000
	Sales revenue					1330000
G2	Cost of goods sold Dr.				620000
	Finished goods inventory					620000
Req 2.
RAW MATERIAL INVENTORY
Balance		212,600	WIP-Refining		149,600
			WIP-Blending		45,000
Ending Balance		18,000
MANUFACTURING OVERHEADS
Accounts Payable		666,000	WIP-Refining		485,000
			WIP-Blending		109,000
Ending balance		72,000
WORK IN PROCESS INVENTORY-REFINING
Balance		32,300	WIP Blending		682,000
Raw material Inv.		149,600
Wages Payable		65,200
Manufacturing Overheads		485,000
Balance		50,100
WORK IN PROCESS INVENTORY-BLENDING
Balance		55,000	Finished Goods Inventory		740,000
WIP-Cooking		682,000
Raw material Inv.		45,000
Wages Payable		16,200
Manufacturing Overheads		109,000
Balance		167,200
FINISHED GOODS INVENTORY
Balance		16,000	Cost of Goods sold		620,000
WIP-Blending		740,000
Balance		136,000