Lubricants, Inc., produces a special kind of grease that is widely used by race

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 33,800 Completed and transferred to Blending Materials Direct labor Overhead March 31 balance 152,600 71,200 477,000 The March 1 work in process inventory in the Refining Department consists of the following elements: materials, $7,300; direct labor, $4,800; and overhead, $21,700. Costs incurred during March in the Blending Department were: materials used, $45,000; direct labor, $16,400; and overhead cost applied to production, $107,000.

Explanation / Answer

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Transactions General Journal Debit Credit a. Work in process-Refining department 152600 Work in process-Blending department 45000 Raw Materials inventory 197600 (To record direct materials used in production) b. Work in process-Refining department 71200 Work in process-Blending department 16400 Salaries and Wages payable 87600 (To record direct labor costs incurred) c. Manufacturing overhead 626000 Accounts Payable 626000 (To record manufacturing overhead incurred) d. Work in process-Refining department 477000 Work in process-Blending department 107000 Manufacturing overhead 584000 (To record manufacturing overhead applied) e. Work in process-Blending department 672000 Work in process-Refining department 672000 (To record transfers from Refining to Blending department) f. Finished goods 710000 Work in process-Blending department 710000 (To record goods completed and transferred to finished goods) g. Accounts receivable 1470000 Sales 1470000 (To record sales on account) Cost of goods sold 690000 Finished goods 690000 (To record cost of sales)

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