During the current year, Mary is compiling figures for a cookie factory's cost accounting, which is currently utilizing traditional costing. The factory produces two kinds of cookies: chocolate chip and oatmeal raisin. Mary would like to calculate the total cost per unit and notes the following costs for chocolate chip: Direct Materials (DM), $68,300; and Direct Labor (DL), $82,450; and the following costs for oatmeal raisin: Direct Materials, $57,890; and Direct Labor, $71,708. The Manufacturing Overhead (MOH) for each cookie will be 85% of their direct labor cost. They created 126,756 units of chocolate chip and 104,222 units of oatmeal raisin during the period. What is the factory's total cost per unit for chocolate chip?
A) $1.64
B) $1.74
C) $2.00
D) $2.10

Question

Quizplus · Accepted Answer

First, calculate total product costs correctly as this question requires calculation of the total cost per unit under traditional costing. $1.74 (Choice B) correctly added together the DM of $68,300 plus the DL of $82,450 plus the MOH of $70,082.50 ($82,450 × 0.85) for a total product cost of $220,832.50. Then, divide this number by the units of chocolate chip cookies (126,756) to arrive at the correct total cost per unit of chocolate chip.

During the Current Year, Mary Is Compiling Figures for a Cookie