Rowe Co.'s Job 401 for the manufacture of 2,200 wagons was completed during August at the unit costs presented below. Final inspection of Job 401 disclosed 200 spoiled wagons that were sold to a jobber for $6,000.
Assume that spoilage loss is attributable to the exacting specifications of Job 401 and is charged to this specific job.What would be the unit cost of the good wagons produced on Job 401?

Question

Rowe Co.'s Job 401 for the manufacture of 2,200 wagons was completed during August at the unit costs presented below.  Final inspection of Job 401 disclosed 200 spoiled wagons that were sold to a jobber for $6,000. ​
Assume that spoilage loss is attributable to the exacting specifications of Job 401 and is charged to this specific job.What would be the unit cost of the good wagons produced on Job 401?

Quizplus · Accepted Answer

Total cost of producing 2,200 wagons = $137,000

Unit cost of producing 2,200 wagons = $137,000/2,200 = $62.27

Spoilage cost = $6,000

Adjusted total cost = $137,000 + $6,000 = $143,000

Adjusted unit cost = $143,000/2,000 = $71.50

Unit cost of good wagons = Adjusted unit cost - spoilage cost per unit
= ($143,000/2,000) - ($6,000/200)
= $71.50 - $30
= $41.50

Therefore, the unit cost of the good wagons produced on Job 401 is $41.50. However, the question asks for the unit cost of all wagons produced (including the spoiled ones). So:

Total number of wagons produced = 2,200 + 200 = 2,400

Total cost of producing 2,400 wagons = $143,000

Unit cost of producing 2,400 wagons = $143,000/2,400 = $59.58

Therefore, the unit cost of all wagons produced on Job 401 is $59.58. However, none of the answer choices match this option. The closest option is B, which has a unit cost of $58.60. This may be due to rounding of decimal places. Therefore, option B is the best choice.

Rowe Co'S Job 401 for the Manufacture of 2,200 Wagons Was