Question

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 32,600 Completed and transferred
to Blending
?
Materials 153,600
Direct labor 76,200
Overhead 480,000
March 31 balance ?

The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $7,800; direct labor, $4,300; and overhead, $20,500.

Costs incurred during March in the Blending Department were: materials used, $45,000; direct labor, $16,300; 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, $616,000. (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, $760,000.

Completed units were sold on account, $1,410,000. 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 $ 44,000
Finished goods $ 28,000

Solutions

Expert Solution

1.

No. Account Titles and Explanation Debit Credit
a. Work in process-Refining department 153600
Work in process-Blending department 45000
Raw Materials inventory 198600
(To record direct materials used in production)
b. Work in process-Refining department 76200
Work in process-Blending department 16300
Wages payable 92500
(To record direct labor costs incurred)
c. Manufacturing overhead 616000
Accounts Payable 616000
(To record manufacturing overhead incurred)
d. Work in process-Refining department 480000
Work in process-Blending department 102000
Manufacturing overhead 582000
(To record manufacturing overhead applied)
e. Work in process-Blending department 632000
Work in process-Refining department 632000
(To record transfers from Refining to Blending department)
f. Finished goods inventory 760000
Work in process-Blending department 760000
(To record goods completed and transferred to finished goods)
g. Accounts receivable 1410000
Sales revenue 1410000
(To record sales on account)
Cost of goods sold 650000
Finished goods inventory 650000
(To record cost of sales)

2.

Raw Materials Inventory Work in Process-Refining Department
Debit Credit Debit Credit
Beg. Bal. 213600 198600 a. Beg. Bal. 32600
a. 153600 632000 e.
End. Bal. 15000 b. 76200
d. 480000
End. Bal. 110400
Work in Process-Blending Department Finished Goods Inventory
Debit Credit Debit Credit
Beg. Bal. 44000 Beg. Bal. 28000
a. 45000 760000 f. f. 760000 650000 g.
b. 16300
d. 102000
e. 632000
End. Bal. 79300 End. Bal. 138000
Wages Payable Cost of Goods Sold (COGS)
Debit Credit Debit Credit
92500 b. g. 650000
End. Bal. 92500 End. Bal. 650000
Manufacturing Overhead Sales Revenue
Debit Credit Debit Credit
c. 616000 582000 d. 1410000 g.
End. Bal. 34000 End. Bal. 1410000
Accounts Payable Accounts Receivable
Debit Credit Debit Credit
616000 c. g. 1410000
End. Bal. 616000 End. Bal. 1410000

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