Tool Time Inc.uses job order costing for its brand new line of homework machines.The cost incurred for production during 2012 totaled $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 totaled $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

The total cost incurred is $7,000 (materials) + $2,500 (direct labor) + $1,000 (overhead) = $10,500. The change in work in process is $5,500 (beginning) - $2,500 (ending) = $3,000. Therefore, the total cost of completed machines is $10,500 + $3,000 = $13,500. Dividing this by 20 machines gives a cost per machine of $675.