PROBLEM 6–15 Comprehensive Process Costing Problem [LO1, LO2, LO3, LO4, LO5] Fryer’s Choice produces a specially blended vegetable oil widely used in restaurant deep fry- ers. The blending process creates a cooking oil that can be heated to a high temperature, but does not smoke or smell. The oil is produced in two departments: Blending and Bottling. Raw materials are introduced at various points in the Blending Department.

The following incomplete Work in Process T-account is available for the Blending Department for March:

 

Work in Process—Blending

 

 

The March 1 beginning inventory in the Blending Department consists of the following cost elements: raw materials, $25,000; direct labour, $4,000; and overhead, $9,000.

Costs incurred during March in the Bottling Department were materials used, $115,000; direct labour, $18,000; and overhead cost applied to production, $42,000. The company uses the weighted-average method in its process costing.

Required:

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

(f) below:

a.       Raw materials were issued for use in production.

b.       Direct labour costs were incurred.

c.       Manufacturing overhead costs for the entire factory were incurred: $225,000. (Hint: Credit Accounts Payable.)

d.       Manufacturing overhead cost was applied to production using a predetermined over- head rate.

 

 

 

 

 

e.       Units that were complete with respect to processing in the Bottling Department were transferred to finished goods: $950,000.

f.        Completed units were sold on account: $1,500,000. 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. (Note: The beginning balance in the Blending Department’s Work in Process account is given above.)

 

Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$681,000
Work in Process—Bottling Department. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  .	65,000
Finished Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20,000

 

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

3.      Prepare a production report for the Blending Department for March.

4.      Prepare the journal entry to record the transfer of finished goods from the Blending Depart- ment to the Bottling Department and post to the appropriate T-accounts prepared in (2) above.