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	33,200	Completed and transferred to Blending	?
Materials	147,600
Direct labor	67,200
Overhead	487,000
March 31 balance	?

The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $7,200; direct labor, $4,800; and overhead, $21,200.

Costs incurred during March in the Blending Department were: materials used, $46,000; direct labor, $17,100; 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.

1. Raw materials used in production.
2. Direct labor costs incurred.
3. Manufacturing overhead costs incurred for the entire factory, $676,000. (Credit Accounts Payable.)
4. Manufacturing overhead was applied to production using a predetermined overhead rate.
5. Units that were complete with respect to processing in the Refining Department were transferred to the Blending Department, $642,000.
6. Units that were complete with respect to processing in the Blending Department were transferred to Finished Goods, $800,000.
7. Completed units were sold on account, $1,360,000. The Cost of Goods Sold was $620,000.

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	$	210,600
Work in process—Blending Department	$	42,000
Finished goods	$	26,000

Answer 1

Ans- 1- Journal Entries

Transaction	General Journal	Debit ($)	Credit ($)
a.	Work in Process- Refining Department	147,600
	Work in Process- Blending Department	46,000
	Raw Materials		193,600
b.	Work in Process- Refining Department	67,200
	Work in Process- Blending Department	17,100
	Salaries and Wages Payable		84,300
c.	Manufacturing Overhead	676,000
	Accounts Payable		676,000
d.	Work in Process- Refining Department	487,000
	Manufacturing Overhead		487,000
d.	Work in Process- Blending Department	103,000
	Manufacturing Overhead		103,000
e.	Work in Process- Blending Department	642,000
	Work in Process- Refining Department		642,000
f.	Finished Goods	800,000
	Work in Process- Blending Department		800,000
g.	Accounts Receivable	1,360,000
	Sales		1,360,000
	Cost of Goods Sold	620,000
	Finished Goods		620,000

2-Accounts Receivable

(g)	$1,360,000

Raw Materials

Bal.	$210,600	(a)	$193,600
Bal.	$17,000

Work in Process- Refining Department

Bal.	$33,200	(e)	$642,000
(a)	$147,600
(b)	$67,200
(d)	$487,000
Bal.	$93,000

Work in Process- Blending Department

Bal.	$42,000	(f)	$800,000
(a)	$46,000
(b)	$17,100
(d)	$103,000
(e)	$642,000
Bal.	$50,100

Finished Goods

Bal.	$26,000	(g)	$620,000
(f)	$800,000
Bal.	$206,000

Manufacturing Overhead

(c)	676,000	(d)	$590,000
Bal.	$86,000

Accounts Payable

(c)

$676,000

Salaries and Wages Payable

		(b)	$84,300

Sales

		(g)	$1,360,000

Cost of Goods Sold

(g)	$620,000

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