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 33,300     Completed and transferred        to Blending ?          Materials 146,600        Direct labor 80,200        Overhead 484,000     March 31 balance ?        The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $9,000; direct labor, $4,200; and overhead, $20,100.      Costs incurred during March in the Blending Department were: materials used, $46,000; direct labor, $17,100; and overhead cost applied to production, $114,000. Required: 1. Prepare journal entries to record the costs incurred in both the Refining Department and Blending Department during March. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) a. Raw materials were issued for use in production. b. Direct labor costs were incurred. c. Manufacturing overhead costs for the entire factory were incurred, $656,000. (Credit Accounts Payable.) d. Manufacturing overhead cost was applied to production using a predetermined overhead rate. e. Units that were complete with respect to processing in the Refining Department were transferred to the Blending Department, $622,000. f. Units that were complete with respect to processing in the Blending Department were transferred to Finished Goods, $710,000. g. Completed units were sold on account, $1,360,000. The Cost of Goods Sold was $670,000. 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 account is given in the above question data.)   Raw materials $ 205,600   Work in process—Blending Department $ 42,000   Finished goods $ 23,000 After posting the entries to the T-accounts, find the ending balance in the inventory accounts and the manufacturing overhead account.

Answer 1

1a	Work in Process - Refining Department	$146,600
	Work in Process - Blending Department	$46,000
	To Raw Materials		$192,600
	(Being raw materials used for production)
b	Work in Process - Refining Department	$80,200
	Work in Process - Blending Department	$17,100
	To Labor costs		$97,300
	(Being Labor costs incurred)
c	Manufacturing overhead	$656,000
	To Accounts Payable		$656,000
	(Being manufacturing overhead incurred)
d	Work in Process - Refining Department	484000
	Work in Process - Blending Department	114000
	To Manufacturing overhead		$598,000
	(Being manufacturing overhead applied)
e	Work in process - Blending Department	$622,000
	To Work in Process - Refining Department		$622,000
	(Being units transferred from refining to Blending)
f	Finished Goods	$710,000
	To Work in process - Blending Department		$710,000
	(Being units completed transferred to finished goods)
g	Accounts Receivable	$1,360,000
	To Sales		$1,360,000
	(Being goods sold on account)
	Cost of Goods Sold	$670,000
	To Finished Goods		$670,000
	(Being cost of goods sold recorded)

Work in Process (Refining Department)
	Debit		Credit
Bal	33300	e	$622,000
a	$146,600
b	$80,200
d	$484,000
		Bal	122100
	744100		744100
Work in Process (Blending Department)
Bal	42000	f	$710,000
a	$46,000
b	$17,100
d	$114,000
e	$622,000	Bal	131100
	841100		$841,100
Manufacturing overhead
c	$656,000	d	$598,000
		Bal	58000
	$656,000		$656,000
Finished Goods
Bal	$23,000	g	$670,000
f	$710,000
		Bal	63000
	$733,000		$733,000
Sales
		g	$1,360,000
Bal	$1,360,000
	$1,360,000		$1,360,000
Cost of Goods sold
g	$670,000
		Bal	$670,000
	$670,000		$670,000
			Raw Materials Bal $205,600 a $192,600 Bal 13000 $205,600 $205,600