Zhau Manufacturing Company has two departments, machining and finishing. For a given period, the following costs were incurred by the company as a whole: drect 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%u2153% of the direct labor costs. 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.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%u2153% 40%
- Chi 33%u2153% 40%
- Delta 33%u2153% 20%
Total for the machining department 100% 100%The indirect production costs incurred by the machining and finishing departments and allocated to all products there in 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 shown as finished-goods inventory if all the products were transferred to finished stock on completion.