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	32,700	Completed and transferred to Blending	?
Materials	154,600
Direct labor	71,200
Overhead	485,000
March 31 balance	?

The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $8,200; direct labor, $3,200; and overhead, $21,300.

Costs incurred during March in the Blending Department were: materials used, $44,000; direct labor, $16,100; and overhead cost applied to production, $105,000.

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, $706,000. (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, $652,000.
6. Units that were complete with respect to processing in the Blending Department were transferred to Finished Goods, $770,000.
7. Completed units were sold on account, $1,470,000. The Cost of Goods Sold was $600,000.

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	$	208,600
Work in process—Blending Department	$	48,000
Finished goods	$	22,000

Answer 1

Journal Entries in the books of Lubricants INC

A - Department (Refining)

1. Work in Process-Refining Department A/c Dr $ 710,000

To Raw Material Ledger A/c Cr $ 154,000

To Direct Labor A/c Cr $ 71,200

To Manufacturing- Overheads Cr $ 485,000  

Being Raw Materials, Direct Labor cost and Manufacturing Overheads charged to the Work In Process -refinery Department

2. Work in Process - Blending Department A/c Dr. $ 652,000

To Work in Process - Refining Department A/c Cr $ 652,000

Being Work in process is transferred from Refining to Blending Department

B- Department(Blending)

1. Work in Process - Refining Department A/c Dr. $ 652,000

To Work in process - Blending Department Cr $ 652,000

Being Work in process is transferred from Refining to Blending Department

2.  Work in process - Blending Department A/c Dr $ 165,000

To Raw Material A/c    Cr 44,000

To Direct Labor A/c Cr 16,100

To Manufactured Overheads A/c Cr 105,000

Being Raw materials , Direct Labors and Manufactured Overheads incurred

3. Finished Goods A/c Dr $ 770,000

To Work in process- Blending Department Cr $ 770,000

Being Finished Goods transfered

4. Cost of Goods Sold A/c Dr 600,000

To Finished Goods A/c Cr 600,000

Being COGS transferred