Problem: Corresponds to CLO 4(b) Ferguson Molding Company produces custom bottle caps and jar covers for large cosmetic companies. Each customer owns the custom-made molds that are used for the caps and jar covers, so caps are produced only to customer order. Each order requires the setting of molds in molding machines. Two full time mechanics, whose combined total annual salary and benefits are $160,000 per year, are employed setting up and breaking down the molding machines. An order consists of anywhere from 50,000 to 500,000 units. 80 orders were received during the year 2008 for individual custom production runs. The total number of units produced was 8 million. If the company allocates the cost of the setup mechanics based on the number of units produced, the setup cost per unit in an order of 300,000 Nurturing Face Cream jar covers for Aristedes Cosmetics Company would be:
a $0.053 per unit
b $0.006 per unit
c $0.02 per unit
d $0, since this is an indirect cost and cannot be traced to the product in question