Answer (B) is correct . Cost of goods sold is based on the manufacturing costs incurred in production. It does not include selling or general and administrative expenses. Manufacturing costs consist of direct materials, $27,400; direct labor, $9,600; and overhead, $20,000 (400 direct labor hours ¡Á $50 per hour). The total of these three cost elements is $57,000. Dividing the $57,000 of total manufacturing costs by the 4,000 units produced results in a per-unit cost of $14.25.
Answer (A) is incorrect because The amount of $9.25 fails to include overhead.
Answer (C) is incorrect because The amount of $14.95 includes administrative costs.
Answer (D) is incorrect because The amount of $17.75 includes selling and administrative costs.
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