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 32,900 Completed and transferred
to Blending
?
Materials 144,600
Direct labor 69,200
Overhead 479,000
March 31 balance ?

The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $7,500; direct labor, $3,600; and overhead, $21,800.

Costs incurred during March in the Blending Department were: materials used, $45,000; direct labor, $16,300; and overhead cost applied to production, $117,000.

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, $686,000. (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, $682,000.

Units that were complete with respect to processing in the Blending Department were transferred to Finished Goods, $750,000.

Completed units were sold on account, $1,460,000. 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 $ 206,600
Work in process—Blending Department $ 55,000
Finished goods $ 18,000

Solutions

Expert Solution

Answer 1.
Weighted Average Method
Journal Entry
Date Particulars Dr. Amt. Cr. Amt.
a. WIP- Refining Department        144,600.00
WIP- Blending Department          45,000.00
Raw Materials        189,600.00
(record the raw materials used in production)
b. WIP- Refining Department          69,200.00
WIP- Blending Department          16,300.00
Salaries & Wages Payable          85,500.00
(record the direct labor incurred)
c. Manufacturing Overhead        686,000.00
Accounts Payable        686,000.00
(Record the manufacturing overhead incurred)
d. WIP- Refining Department        479,000.00
WIP- Blending Department        117,000.00
Manufacturing Overhead        596,000.00
(record the maufactuing overhead applied)
e. WIP - Blending Department        682,000.00
WIP - Refining Department        682,000.00
(record the WIP completed in refining department transf. to Blending Departent)
f. Finished Goods Inventory        750,000.00
WIP - Blending Department        750,000.00
(record the goods completed)
g-1. Accounts Receivable    1,460,000.00
Sales    1,460,000.00
(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      32,900.00 Completed & Transff. to Blending €    682,000.00 Mar 1 Balance    206,600.00 WIP - Refining    144,600.00
Materials (a)    144,600.00 WIP - Blending      45,000.00
Direct Labor (b)      69,200.00
Overhead (d)    479,000.00
Mar 31, Balance      43,700.00 Mar 31, Balance      17,000.00
WIP - Blending Department Finished Goods
Mar 1 Balance      55,000.00 Finished goods (f)    750,000.00 Mar 1 Balance      18,000.00 Cost of Goods Sold (g-2)    650,000.00
Materials (a)      45,000.00 WIP - Blending (f)    750,000.00
Direct Labor (b)      16,300.00
Overhead (d)    117,000.00
WIP - Refinning €    682,000.00
Mar 31, Balance    165,300.00 Mar 31, Balance    118,000.00

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