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9 October, 17:15

Waterway Sportswear manufactures a line of specialty T-shirts using a job order costing system. In March the company incurred the following costs to complete Job ICU2: direct materials, $13,700, and direct labor, $4,800. The company also incurred $1,490 of administrative costs and $5,400 of selling costs to complete this job. Job ICU2 required 790 machine hours. Factory overhead was applied to the job at a rate of $25 per machine hour.

If Job ICU2 resulted in 6,400 good shirts, what was the cost of goods sold per shirt?

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  1. 9 October, 17:30
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    Cost of goods sold per shirt = $5.98

    Explanation:

    As per the data given in the question,

    Direct material = $13,700

    Direct labor = $4,800

    Factor OH applied = 790*$25 = $19,750

    Total production cost = $38,250

    No. of units per job ICU2 = 6,400

    Cost of goods sold per shirt = Total production cost : No. of units per job ICU2

    = $38,250 : 6,400

    = $5.98

    Hence, Cost of goods per shirt = $5.98
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