Kostelnik Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $231,000, variable manufacturing overhead of $2.80 per machine-hour, and 30,000 machine-hours. The company has provided the following data concerning Job A496 which was recently completed:

Number of units in the job 20
Total machine-hour 80
Direct materials $870
Direct labor cost $1,740

The unit product cost for Job A496 is closest to:

Unitary cost= $172.5

Explanation:

Giving the following information:

Estimated total fixed manufacturing overhead= $231,000

Variable manufacturing overhead= $2.80 per machine-hour

Estimated machine-hours= 30,000

Job A496:

Number of units in the job 20

Total machine-hour 80

Direct materials $870

Direct labor cost $1,740

First, we need to calculate the estimated manufacturing overhead rate:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 231,000/30,000 + 2.8

Estimated manufacturing overhead rate= $10.5 per machine hour

Now, we can determine the total cost of Job A496:

Total cost= 870 + 1,740 + (10.5*80)

Total cost= $3,450

Finally, the unitary cost:

Unitary cost= 3,450/20

Unitary cost= $172.5