Lucy Sportswear manufactures a specialty line of T-shirts using a job-order cost system. During March, the following costs were incurred in completing Job ICU2: direct materials, $13,700; direct labor, $4,800; administrative, $1,400; and selling, $5,600. Factory overhead was applied at the rate of $25 per machine hour, and Job ICU2 required 800 machine hours. If Job ICU2 resulted in 7,000 good shirts, the cost of goods sold per unit would be

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Paulina

Business

16 June, 11:32

Lucy Sportswear manufactures a specialty line of T-shirts using a job-order cost system. During March, the following costs were incurred in completing Job ICU2: direct materials, $13,700; direct labor, $4,800; administrative, $1,400; and selling, $5,600. Factory overhead was applied at the rate of $25 per machine hour, and Job ICU2 required 800 machine hours. If Job ICU2 resulted in 7,000 good shirts, the cost of goods sold per unit would be

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Isabel Vargas · Answer 1

Unit cost = $5,5unit

Explanation:

Total manufacturing cost is the aggregate amount of cost incurred by a business to produce goods in a reporting period.

Generally accepted accounting principles require that the cost of goods sold shall consist of:

the cost of direct materials

the cost of direct labor

the cost of manufacturing overhead

Expenses that are outside of the manufacturing facilities, such as selling, general and administrative expenses, are not product costs. They are reported as expenses on the income statement in the accounting period in which they occur.

In this exercise:

Cost of goods manufactured:

Direct materials = $13700

Direct Labor=$4800

Factory overhead = 800hours*$25=$20000

Total = $38500

Unit cost = 38500/7000=$5,5unit