Question

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:

a.$5.70. b.$6.50. c.$5.50. d.$6.30.

Answer 1

Job order costing is a costing method which is used to determine the cost of manufacturing each product. This costing method is usually adopted when the manufacturer produces a variety of products which are different from one another and needs to calculate the cost for doing an individual job. Job costing includes the direct labor, direct materials, and manufacturing overhead for that particular job.

Job Cost sheet for Lucy Sportswear for job ICU 2 is as below.

Job cost Sheet for ICU2 Cost summary Amount Direct Material 13,700 Direct Labour 4,800 Factory Overhead (25*800) 20,000 Total Cost 38,500

7,000 T shirts were sold.

Cost of goods sold for ech unit = $5.50. (38,500/7,000)

So answer for above question is C which is $5.50