Tool Time Inc.uses job-order costing for its brand new line of homework machines.The cost incurred for production during 2016 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 add up the total cost incurred and divide that by the number of machines completed.
Total cost incurred = $7,000 (materials) + $2,500 (direct labour) + $1,000 (manufacturing overhead applied) + $5,500 (beginning work in process) - $2,500 (ending work in process) = $13,500
Cost per machine = $13,500/20 machines = $675/machine
Therefore, the best choice is B.