Cost FlowsNature's Way. Inc., keeps one of its production facilities busy making a per...

Cost Flows

Nature's Way. Inc., keeps one of its production facilities busy making a perfume called Essence de la Vache. The perfume goes through two processing departments: Blending and Bottling.

The following incomplete Work in Process account is provided for the Blending Department for March:

The $32,800 beginning inventory in the Blending Department consisted of the following elements: materials, $8,000; direct labor. $4,000: and overhead applied, $20,800.

Costs incurred during March in the Bottling Department were: materials used. $45,000: direct labor. SI7.000: and overhead cost applied to production, $108,000.

Required:

1. Prepare journal entries to record the costs incurred in both the Blending Department and Bottling Department during March. Key your entries to items (a) through (g) below:

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. $596,000. (Credit Accounts Payable and use a single Manufacturing Overhead control account for the entire factory.)

d. Manufacturing overhead was applied to production using a predetermined overhead rate.

e. Units that were complete with respect to processing in the Blending Department were transferred to the Bottling Department, $722,000.

f. Units that were complete with respect to processing in the Bottling Department were transferred to Finished Goods, $920,000.

g. Completed units were sold on account for $1,400,000. The cost of goods sold was $890,000.

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 Blending Department's Work in Process account is given above.)

After posting the entries to the T-accounts, find the ending balances in the inventory accounts and the manufacturing overhead account.