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