PROBLEM 4–16 Cost Flows [LO1]
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:
Work in Process—Blending
March 1 balance 32,800
Direct labor 73,200
Completed and transferred
to Bottling (760,000 ounces) ?
March 31 balance ?
The $32,800 beginning inventory in the Blending Department consisted of the following ele- ments: 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, $17,000; and overhead cost applied to production, $108,000.
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
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.