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.

Transaction / Event Account Titles Debit Credit
$ $
a. Work in Process: Refining 153,600
Work in Process: Blending 45,000
Raw Materials Inventory 198,600
b. Work in Process: Refining 76,200
Work in Process: Blending 16,300
Wages Payable 92,500
c. Manufacturing Overhead 616,000
Accounts Payable 616,000
d. Work in Process: Refining 480,000
Work in Process: Blending 102,000
Manufacturing Overhead 582,000
e. Work in Process: Blending 632,000
Work in Process Refining 632,000
f. Finished Goods Inventory 760,000
Work in Process: Blending 760,000
g. Accounts Receivable 1,410,000
Sales 1,410,000
Cost of Goods Sold 650,000
Finished Goods Inventory 650,000

2. Raw Materials Inventory:

Beginning Balance 213,600 Work in Process: Refining 153,600
Work in Process: Blending 45,000
Ending Balance 15,000

Work in Process: Refining

Beginning balance 32,600 Work in Process: Blending 632,000
Raw Materials Inventory 153,600
Wages Payable 76,200
Manufacturing Overhead 480,000
Ending Balance 110,400

Work in Process: Blending:

Beginning Balance 44,000 Finished Goods Inventory 760,000
Work in Process: Refining 632,000
Raw Materials Inventory 45,000
Wages Payable 16,300
Manufacturing Overhead 102,000
Ending Balance 79,300

Finished Goods Inventory

Beginning Balance 28,000 Cost of Goods Sold 650,000
Work in Process: Blending 760,000
Ending Balance 138,000

Manufacturing Overhead:

Accounts Payable 616,000 Work in Process: Refining 480,000
Work in Process: Blending 102,000
Underapplied 34,000

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