Lucy Sportswear manufactures a specialty line of T-shirts.The company uses a job-order costing system.During March,the following costs were incurred on Job ICU2: direct materials $13,700 and direct labour $4,800.In addition,selling and shipping costs of $7,000 were incurred on the job.Manufacturing overhead was applied at the rate of $25 per machine-hour and Job ICU2 required 800 machine-hours.If Job ICU2 consisted of 7,000 shirts,the Cost of Goods Sold per shirt was:

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The correct answer is A. The cost of goods sold per shirt is calculated as follows:Direct materials: $13,700 / 7,000 shirts = $1.96 per shirtDirect labor: $4,800 / 7,000 shirts = $0.69 per shirtManufacturing overhead: $25 per machine-hour x 800 machine-hours / 7,000 shirts = $2.86 per shirtTotal cost of goods sold per shirt: $1.96 + $0.69 + $2.86 = $5.50 per shirt

Lucy Sportswear Manufactures a Specialty Line of T-Shirts