Question: Cost Accumulation and Allocation Saouma 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, $400,000; direct labor, $90,000; and indirect production, $40,000. The grand total was $530,000. The machining department incurred 50% of the direct-material costs, but only 10% of the directlabor costs. Indirect production costs amounted to $10,000 in the machining department and $30,000 in finishing. Three products were produced using the following proportions of direct material and direct labor in the two departments.
As is commonplace, indirect production costs incurred by each department were allocated to products in proportion to the direct-labor costs of products within the departments.
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 shown as finished-goods inventory if all the products were transferred to finished stock on completion. (There were no beginning inventories.)