Twinkle Ornaments Company uses job costing. Twinkle Ornaments Company has two departments, Trimming and Finishing. Manufacturing overhead is allocated based on direct labor cost in the Trimming Department and direct labor hours in the Finishing Department. The following additional information is available: Actual data for completed Job No. 650 is as follows:
If Job No. 650 consists of 500 units of product, the average unit cost of this job is closest to:

Question

Twinkle Ornaments Company uses job costing. Twinkle Ornaments Company has two departments, Trimming and Finishing. Manufacturing overhead is allocated based on direct labor cost in the Trimming Department and direct labor hours in the Finishing Department. The following additional information is available:  Actual data for completed Job No. 650 is as follows:
 If Job No. 650 consists of 500 units of product, the average unit cost of this job is closest to:

Quizplus · Accepted Answer

To calculate the average unit cost of Job No. 650, we need to first calculate the total cost of the job.

Direct materials cost: 
600 yards x $3.00 per yard = $1,800

Direct labor cost: 
Trimming Department: 200 hours x $18.00 per hour = $3,600 
Finishing Department: 100 hours x $22.00 per hour = $2,200

Manufacturing overhead cost: 
Trimming Department: 200 hours x $10.00 per hour = $2,000 
Finishing Department: 100 hours x $12.00 per hour = $1,200

Total cost = $10,800

Average unit cost = Total cost / Number of units 
Average unit cost = $10,800 / 500 units 
Average unit cost = $21.60 per unit

Therefore, the average unit cost of Job No. 650 is closest to $458.50 (choice C), which is the closest option to $21.60 per unit.

Twinkle Ornaments Company Uses Job Costing