Madison Inc. uses job order costing for its brand new line of sewing machines. The cost incurred for production during 2017 totaled $18000 of materials $9000 of direct labor costs and $6000 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 totaled $15000 and the ending balance is $9000. During the year the company completed 25 machines. How much is the cost per machine?

Question

Quizplus · Accepted Answer

The total cost of production is calculated by adding materials, labor, and overhead costs ($18,000 + $9,000 + $6,000 = $33,000). The total cost to account for includes the beginning work in process and the total production costs, and then subtracts the ending work in process ($15,000 + $33,000 - $9,000 = $39,000). Dividing this by the number of machines (25) gives the cost per machine ($39,000 / 25 = $1,560).