Tool Time Inc.uses job-order costing for its brand new line of homework machines.The cost incurred for production during 2020 totalled $7,000 of materials, $2,500 of direct labour costs, and $1,000 of manufacturing overhead applied.The company ships all goods as soon as they are completed which results in no finished goods inventory on hand at the end of any year.Beginning work in process totalled $5,500, and the ending balance is $2,500.During the year, the company completed 20 machines.How much is the cost per machine?

Question

Quizplus · Accepted Answer

To calculate the cost per machine, we need to consider the total cost incurred for production during 2020 along with the beginning and ending work in process inventory.

Total Cost Incurred = Materials Cost + Direct Labor Cost + Manufacturing Overhead Cost Applied
Total Cost Incurred = $7,000 + $2,500 + $1,000
Total Cost Incurred = $10,500

Cost of Goods Manufactured = Total Cost Incurred + Beginning Work in Process Inventory - Ending Work in Process Inventory
Cost of Goods Manufactured = $10,500 + $5,500 - $2,500
Cost of Goods Manufactured = $13,500

Cost Per Machine = Cost of Goods Manufactured / Number of Machines Completed
Cost Per Machine = $13,500 / 20
Cost Per Machine = $675

Therefore, the cost per machine is $675, and the best choice is B.