Question

Vikings, Inc., manufactures custom-made furniture on a job-order basis. It uses a normal costing system in its factory. It treats the costs associated with spoilage and reworked units as arising due to the specifications of a particular job. At the beginning of the year 2018, overhead rate was set at $12 per machine hour. During January 2018. Job 2003, for the production of 200 executive chairs, was completed at the following costs per unit: Direct materials $10 and Direct labor of $10. A total of 200 machine-hours were used in the production of chairs. Final inspection of Job 2003 disclosed 30 chairs with defective castors. New castors were manually attached to these chairs at a total cost of $860 (cost of castors $540 and direct labor $260), 20 other chairs broke in the compression test and the cushions salvaged from these chairs were sold for a total cash value of $60. These 20 broken chairs were considered to be normal spoilage. What is the per unit cost of the good chairs in Job 200J? (Show your work in the space below to get partial credit.)

Answer 1

Cost Items	Amounts $
Direct material (200 chairs X$10)	$2000
Direct Labor (200 chairs X $10)	$2000
Overhead (200 machines hours X $12)	$2400
Additiona Total cost incurreon defective chairs :	$860
Less: Salvage value of broken chairs	($60)
Net cost of good chairs	$7200
Numbers of good chairs {200 chairs (Produced) - 20 (normal spoilage)}	180 units
Per Unit Cost of good chair in Job 200 ($7200/180 units)	$40