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	32,500	Completed and transferred to Blending	?
Materials	152,600
Direct labor	68,200
Overhead	479,000
March 31 balance	?

The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $8,800; direct labor, $3,700; and overhead, $20,000.

Costs incurred during March in the Blending Department were: materials used, $44,000; direct labor, $16,400; 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.

1. Raw materials used in production.
2. Direct labor costs incurred.
3. Manufacturing overhead costs incurred for the entire factory, $656,000. (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, $652,000.
6. Units that were complete with respect to processing in the Blending Department were transferred to Finished Goods, $780,000.
7. Completed units were sold on account, $1,350,000. 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 is given in the T-account shown above.)

Raw materials	$	213,600
Work in process—Blending Department	$	49,000
Finished goods	$	25,000

Answer 1

No.	Journal Entries				Debit	Credit
a	Work in process inventory-refining				152,600
	work in process inventory - blending				44,000
	raw materials inventory					196,600
b	Work in process inventory-refining				68,200
	work in process inventory - blending				16,400
	Salaries and wages payable					84,600
c	manufacturing overhead				656,000
	accounts payable					656,000
d	Work in process inventory-refining				479,000
	work in process inventory - blending				117,000
	manufacturing overhead					596,000
e	work in process inventory-blending				652,000
	work in process inventory-refining					652,000
f	finished goods inventory				780,000
	work in process inventory-blending					780,000
g	accounts receivable				1,350,000
	sales					1,350,000
	cost of goods sold				670,000
	finished goods inventory					670,000
T-Accounts
Raw Materials Inventory					Manufacturing overhead
Beg bal	213,600				Beg Bal
		196,600	a.		c	656,000	596,000	d
end bal	17,000
					End bal	60,000
work in process inventory-Refining					Accounts receivable
Beg bal	32,500				g.	1,350,000
a	152,600	652,000	e.
b.	68,200
d	479,000
End bal	80,300				End bal	1,350,000
Work in process inventory-Blending					Accounts payable
Beg Bal	49,000						656,000	c.
a	44,000	780,000	f.
b.	16,400
d	117,000
e	652,000
End bal	98,400				end bal		656,000
finished goods inventory					Salaries and wages payable
beg bal	25,000				Beg bal
f	780,000	670,000	g				84,600	b.
end bal	135,000				end bal		84,600
cost of goods sold					Sales
g.	670,000						1,350,000	g.
end bal	670,000				end bal		1,350,000