7. [CPA Adapted] During August 2007, Epsilon Company incurred the following cost

Question

7. [CPA Adapted] During August 2007, Epsilon Company incurred the following costs on Job 101 for the manufacture of 600 scoreboard clocks: Original cost accumulation: $2,250 Direct materials Direct manufacturing labour..mmmm1800 Manufacturing overhead (150% of direct manufacturing labour) 2.700 $6.750 Direct costs of reworked 15 units: Direct materials Direct manufacturing labour $150 240 $390 The rework costs were attributable to exacting specifications of Job 101, and the full rework costs were charged to the specific job. The cost per finished unit of Job 101 was $11.25. b. $11.61 $11.90. $12.50.

Explanation / Answer

Since the rework cost is only incurred on specific 15 units and is charged to specific job, it cannot be allocated to other units in job 101.

Cost per unit = $6750/ 600

= $11.25

Option a is correct

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