Answer to Question #30044 in Economics of Enterprise for Rikaz

Question

KIM Inc. manufactures tables and chairs. Both products are manufactured in the same factory, with many common costs. Each product is treated as a separate division. Its design for both products is purposely simplistic: two-by-fours are glued together to form the tabletop/seat, and two-by-fours are nailed onto the tabletop/seat to serve as legs. The products have been described as “wobbly”, which adds to the charm of the product, according to the salespeople.

KIM Inc. uses a job-costing system that has two direct-cost categories, (direct material and direct labour), and one indirect cost pool, (manufacturing overhead), which is allocated using direct labour costs.

The following information is given for the chair division:
a) Raw Materials purchases in September equaled $125,000.
b) Balance in the Wages Payable account on September 30, 2013 is $21,000.
c) Balance in the MOH account on September 30, 2013 is a $121,000 debit.
d) Balance in the Finished Goods account on August 31, 2013 is $47,000.