Dixon Corporation was established on January 1, Year 1. The firm has 2 divisions, Division A and Division B. Division A manufactures standard carpets, and Division B manufactures custom furniture.
During the first year, Division A produced one standard carpet, C450. In the beginning of Year 2, the firm introduced the second product line, C550. Through effective marketing, the firm is able to increase its market share. The firm is considering introducing the 3rd product line, C650 within the next few months.
Division B had a marginally successful first year. The Division uses normal costing in its job-order costing system with manufacturing overhead applied based on direct labour hours. The management realizes that an accurate costing system in Division B is essential for the survival of the Division.
For Division A, you have obtained the following partially completed Statement of Costs of Goods Manufactured and Sold for the month of March, Year 2. Upon review of the books and discussions with key personnel, you are able to gather additional key information as shown below.
Incomplete Statement of Cost of Goods Manufactured and Sold for the month of March: (all amounts in $?000s):
Question Cost Terms:
You recognize that cost behavior is a fundamental concept used in decision-making. With a view to understanding the behavior of the direct costs, you have gathered the following information for Division A for the month of January, Year 2.
- Cost of goods manufactured = $280,000
- Manufacturing costs incurred in the month = $300,000
- Prime costs = 60% of the manufacturing costs incurred in the month
- Conversion costs = 70% of the manufacturing costs incurred in the month