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	32,100	Completed and transferred to Blending	?
Materials	150,600
Direct labor	77,200
Overhead	478,000
March 31 balance	?

The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $8,400; direct labor, $3,800; and overhead, $19,900.

Costs incurred during March in the Blending Department were: materials used, $45,000; direct labor, $16,900; 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.

Raw materials used in production.

Direct labor costs incurred.

Manufacturing overhead costs incurred for the entire factory, $686,000. (Credit Accounts Payable.)

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

Units that were complete with respect to processing in the Refining Department were transferred to the Blending Department, $692,000.

Units that were complete with respect to processing in the Blending Department were transferred to Finished Goods, $760,000.

Completed units were sold on account, $1,450,000. 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	$	207,600
Work in process—Blending Department	$	49,000
Finished goods	$	20,000

Answer 1

Prepare journal entries to record the costs incurred in both the Refining Department and Blending Department during March.
Date	Accounts title and explaination	Debit	Credit
a	Work in progress -refining department	$ 150,600.00
	Work in Process-Blending Department	$ 45,000.00
	TO Raw Material control account		$ 195,600.00
	(To record issue of raw materials for production)
b	Work in progress -refining department	$ 77,200.00
	Work in Process-Blending Department	$ 16,900.00
	TO cash		$ 94,100.00
	(To record direct labour cost incurred)
c	Manufacturing Overhead Control Account	$ 686,000.00
	To Accounts payable		$ 686,000.00
	(To record manfacturing expense incurred)
d	Work in progress -refining department	$ 478,000.00
	Work in Process-Blending Department	$ 102,000.00
	To Manufacturing Overhead Control Account		$ 580,000.00
	(To record overhead applied at pre determined oh rates)
e	Work in Process-Blending Department	$ 692,000.00
	To Work in progress -refining department		$ 692,000.00
	(To record cost of goods completed and transaferred)
f	Finished goods	$ 760,000.00
	To Work in Process-Blending Department		$ 760,000.00
	(To record cost of goods finished transferred)
g	Cost of goods sold	$ 620,000.00
	To Finished goods		$ 620,000.00
	(To record the cost of gooods sold)
T-Accounts :
Work in progress -refining department
Date	Particulars	Amount	Date	Particulars	Amount
Mar-01	To balance	32100		By completed and transferred to blending	692000
	To rawmaterial	150600
	To labour	77200	Mar-31	By balance	45900
	To oH applied	478000
		737900			737900
Work in Process-Blending Department
Date	Particulars	Amount	Date	Particulars	Amount
Mar-01	To balance	49000		By completed and transferred to finished goods	760000
	To Transfer from refining dept.	692000
	To rawmaterial	45000
	To labour	16900	Mar-31	By balance	144900
	To oH applied	102000
		904900			904900
Finished goods A/c
Date	Particulars	Amount	Date	Particulars	Amount
Mar-01	To balance	20000		By cost of goods sold	620000
	To Transfer from blending dept.	760000
			Mar-31	By balance	160000
		780000			780000
Raw material A/c
Date	Particulars	Amount	Date	Particulars	Amount
Mar-01	To balance	207600		By issued for production	195600
	To purchases	Not given
			Mar-31	By balance	Cant be found
Production overhead control A/c
Date	Particulars	Amount	Date	Particulars	Amount
march	Accounts payable	686000		By transfer to work in progress	580000
				By Balance (under applied OH)	106000
		686000			686000
Balances as on mar 31 :
WIP -Refining	$                                      45,900.00
WIP -Blending	$                                     144,900.00
Finished goods	$                                     160,000.00
Manfacturing OH	$                                     106,000.00
Inventory	Cant be found