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 labour $4,800, administrative $1,400, and selling $5,600. Factory overhead was allocated 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:

Question

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The total cost for Job ICU2 includes direct materials, direct labor, and factory overhead (administrative and selling costs are not included in the cost of goods sold). The total cost is calculated as follows: Direct materials: $13,700 Direct labor: $4,800 Factory overhead: $25 * 800 machine hours = $20,000 Total cost: $13,700 + $4,800 + $20,000 = $38,500 The cost per unit is then $38,500 / 7,000 shirts = $5.50.

Lucy Sportswear Manufactures a Specialty Line of T-Shirts Using a Job