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In: Accounting

Lubricants, Inc., produces a special kind of grease that is widely used by race car drivers....

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 153,600 Direct labor 71,200 Overhead 477,000 March 31 balance ? The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $7,800; direct labor, $4,000; and overhead, $20,900. Costs incurred during March in the Blending Department were: materials used, $45,000; direct labor, $16,400; and overhead cost applied to production, $103,000. 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, $646,000. (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, $652,000. Units that were complete with respect to processing in the Blending Department were transferred to Finished Goods, $720,000. Completed units were sold on account, $1,340,000. The Cost of Goods Sold was $650,000. 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 $ 213,600 Work in process—Blending Department $ 58,000 Finished goods $ 10,000

Solutions

Expert Solution

Answer 1.
Weighted Average Method
Journal Entry
Date Particulars Dr. Amt. Cr. Amt.
a. WIP- Refining Department        153,600.00
WIP- Blending Department          45,000.00
Raw Materials        198,600.00
(record the raw materials used in production)
b. WIP- Refining Department          71,200.00
WIP- Blending Department          16,400.00
Salaries & Wages Payable          87,600.00
(record the direct labor incurred)
c. Manufacturing Overhead        646,000.00
Accounts Payable        646,000.00
(Record the manufacturing overhead incurred)
d. WIP- Refining Department        477,000.00
WIP- Blending Department        103,000.00
Manufacturing Overhead        580,000.00
(record the maufactuing overhead applied)
e. WIP - Blending Department        652,000.00
WIP - Refining Department        652,000.00
(record the WIP completed in refining department transf. to Blending Departent)
f. Finished Goods Inventory        720,000.00
WIP - Blending Department        720,000.00
(record the goods completed)
g-1. Accounts Receivable    1,340,000.00
Sales    1,340,000.00
(recor the goods sold)
g-2. Cost o Goods Sold        650,000.00
Finished Goods Inventory        650,000.00
(Record the cost of goods sold
Answer 2.
WIP - Refining Department Raw Materials
Mar 1 Balance      32,700.00 Completed & Transff. to Blending €    652,000.00 Mar 1 Balance    213,600.00 WIP - Refining    153,600.00
Materials (a)    153,600.00 WIP - Blending      45,000.00
Direct Labor (b)      71,200.00
Overhead (d)    477,000.00
Mar 31, Balance      82,500.00 Mar 31, Balance      15,000.00
WIP - Blending Department Finished Goods
Mar 1 Balance      58,000.00 Finished goods (f)    720,000.00 Mar 1 Balance      10,000.00 Cost of Goods Sold (g-2)    650,000.00
Materials (a)      45,000.00 WIP - Blending (f)    720,000.00
Direct Labor (b)      16,400.00
Overhead (d)    103,000.00
WIP - Refinning €    652,000.00
Mar 31, Balance    154,400.00 Mar 31, Balance      80,000.00

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