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	30,200	Completed and transferred to Blending	?
Materials	139,600
Direct labor	75,200
Overhead	487,000
March 31 balance	?

The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $7,300; direct labor, $3,100; and overhead, $19,800.

Costs incurred during March in the Blending Department were: materials used, $45,000; direct labor, $17,600; and overhead cost applied to production, $104,000.

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, $626,000. (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, $800,000.

Completed units were sold on account, $1,300,000. The Cost of Goods Sold was $690,000.

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	$	48,000
Finished goods	$	20,000

Answer 1

Answer 1.
Weighted Average Method
Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
a.	WIP- Refining Department	139,600.00
	WIP- Blending Department	45,000.00
	Raw Materials		184,600.00
	(record the raw materials used in production)
b.	WIP- Refining Department	75,200.00
	WIP- Blending Department	17,600.00
	Salaries & Wages Payable		92,800.00
	(record the direct labor incurred)
c.	Manufacturing Overhead	626,000.00
	Accounts Payable		626,000.00
	(Record the manufacturing overhead incurred)
d.	WIP- Refining Department	487,000.00
	WIP- Blending Department	104,000.00
	Manufacturing Overhead		591,000.00
	(record the maufactuing overhead applied)
e.	WIP - Blending Department	692,000.00
	WIP - Refining Department		692,000.00
	(record the WIP completed in refining department transf. to Blending Departent)
f.	Finished Goods Inventory	800,000.00
	WIP - Blending Department		800,000.00
	(record the goods completed)
g-1.	Accounts Receivable	1,300,000.00
	Sales		1,300,000.00
	(recor the goods sold)
g-2.	Cost o Goods Sold	690,000.00
	Finished Goods Inventory		690,000.00
	(Record the cost of goods sold

Answer 2.
WIP - Refining Department					Raw Materials
Mar 1 Balance	30,200.00	Completed & Transff. to Blending €	692,000.00		Mar 1 Balance	211,600.00	WIP - Refining	139,600.00
Materials (a)	139,600.00						WIP - Blending	45,000.00
Direct Labor (b)	75,200.00
Overhead (d)	487,000.00
Mar 31, Balance	40,000.00				Mar 31, Balance	27,000.00
WIP - Blending Department					Finished Goods
Mar 1 Balance	48,000.00	Finished goods (f)	800,000.00		Mar 1 Balance	20,000.00	Cost of Goods Sold (g-2)	690,000.00
Materials (a)	45,000.00				WIP - Blending (f)	800,000.00
Direct Labor (b)	17,600.00
Overhead (d)	104,000.00
WIP - Refinning €	692,000.00
Mar 31, Balance	106,600.00				Mar 31, Balance	130,000.00