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Zhao Manufacturing Company

See the attached file.

Zhao Manufacturing Company has two departments, machining and finishing. For a given period the following costs were incurred by the company as a whole: direct material, $200,000; direct labor, $75,000; and indirect production, $80,000. The grand total was $355,000.

The machining department incurred 70% of the direct material costs, but only 33 1/3% of the direct labor costs. As in commonplace, indirect production costs incurred by each department were allocated to products in proportion to the direct-labor costs of products within the departments. Three products were produced.

Product Direct Material Direct Labor
Sigma 40% 30%
Chi 30% 30%
Delta 30% 40%
Total for the machining department 100% 100%

Sigma 33.33% 40%
Chi 33.33% 40%
Delta 33.33% 20%
Total for the finishing department 100% 100%
The indirect production costs incurred by the machining and finishing departments and allocated to all
products therein amounted to machining, $38,000 and finishing, $42,000.
1. Compute the total costs incurred by the machining department and added by the finishing department.
2. Compute the total costs of each product that would be show as finished-goods inventory if all the products were transferred to finished stock on completion. (There were no beginning inventories).

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Solution Summary

Tutorial is attached in excel and helps you to organize the data. The calculations are viewed by clicking in the cells.

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