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	33,600	Completed and transferred to Blending	?
Materials	146,600
Direct labor	68,200
Overhead	474,000
March 31 balance	?

The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $8,800; direct labor, $4,900; 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, $114,000.

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, $676,000. (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, $632,000.

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

Completed units were sold on account, $1,360,000. 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	$	212,600
Work in process—Blending Department	$	41,000
Finished goods	$	20,000

Answer 1

Journal entriess:
S.no.	Accounts title and explanations				Debit $	Credit$
a.	Work in process Inventory-Refining Dr.				146600
	Work in process inventory-Blending Dr.				45000
	Raw material inventory					191600
b.	Work in process Inventory-Refining Dr.				68200
	Work in process inventory-Blending Dr.				16900
	Wages payable					85100
c.	Manufacturing Overheads Dr.				676000
	Accounts payable					676000
d.	Work in process Inventory-Refining Dr.				474000
	Work in process inventory-Blending Dr.				114000
	Manufacturing Overheads					588000
e.	Work in process inventory-Blending Dr.				632000
	Work in process inventory-Refining					632000
f.	Finished Goods inventory Dr.				740000
	Work in prcess-Blending					740000
g.	Accounts receivable Dr.				1360000
	Sales revenue					1360000
	Cost of goods sold Dr.				620000
	Finished goods inventory					620000
RAW MATERIAL INVENTORY
Balance		212,600	WIP-Blending		45,000
			WIP-Refining		146,600
Ending Balance		21,000
Finished Goods inventory
Balance		20,000	Cost of goods sold		620,000
WIP-Blending		740,000
Ending balance		140,000
WORK IN PROCESS INVENTORY-REFINING
Balance		33,600	WIP-Blending		632,000
Raw material Inv.		146,600
Wages Payable		68,200
Manufacturing Overheads		474,000
Balance		90,400
WORK IN PROCESS INVENTORY-BLENDING
Balance		41,000	Finished Goods Inventory		740,000
WIP-Refining		632,000
Raw material Inv.		45,000
Wages Payable		16,900
Manufacturing Overheads		114,000
Balance		108,900