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4. Charlie Company manufactures a specialty line of shirts. The company uses a job-order costing system. During the month, the following costs were incurred on Job 101: Direct materials $2,500 Direct labor $1,500. Manufacturing overhead was applied at the rate of $25 per machine-hour (MH) and Job 101 required 175 MHs. In addition, selling and shipping costs of $11,000 were incurred on all shirts delivered to customers during the month. If Job 101 consisted of 3,000 shirts, the cost of goods manufactured per unit is A) $2.79 B) $6.45 C) $47.86 D) $110.71 1 32.20
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Answer: A. $ 2.79

Direct Materials $ 2,500
Direct Labor 1,500
Manufacturing Overhead ( $ 25 x 175 ) 4,375
Total Manufacturing Costs $ 8,375
Number of Units Manufactured 3,000
Cost of Goods Manufactured per Unit $ 2.79

Selling and shipping costs are not manufacturing costs, hence should not be included in product cost.

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