Madison Inc. uses job order costing for its brand new line of sewing machines. The cost incurred for production during 2010 totaled $18,000 of materials, $9,000 of direct labor costs, and $6,000 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 $15,000, and the ending balance is $9,000. During the year, the company completed 40 machines. How much is the cost per machine?

Question

Quizplus · Accepted Answer

Cost of goods manufactured = Beginning work in process + Total manufacturing costs - Ending work in process
Cost of goods manufactured = $15,000 + ($18,000 + $9,000 + $6,000) - $9,000
Cost of goods manufactured = $39,000

Cost per machine = Cost of goods manufactured / Number of machines completed
Cost per machine = $39,000 / 40
Cost per machine = $975

Therefore, the cost per machine is $975, which is option B.