Question

A bank issues credit cards to its eligible customers and processes them. It follows the process-costing system to record the costs incurred on credit card issuance and processing. Costs incurred during the month of October are as follows:

Direct labor $7,900
Overhead $2,900
Number of credit cards issued and processed 1,200

Calculate the cost per credit card for October.
a. $8 per card
b. $11 per card
c. $9 per card
d. $10 per card

Answer 1

The cost per credit card issued is calculated by adding the direct labor and overhead costs, totaling $10,800, and dividing by the number of cards issued, yielding $9 per credit card. The correct option is C.

Step-by-step explanation:

The question at hand involves a calculation of the cost per credit card issued by a bank, which is a typical problem that can be addressed using principles of process costing in management accounting. The computation requires that we add both direct labor and overhead costs incurred during the month and then divide this sum by the number of credit cards issued and processed to calculate the cost per card.

For the given scenario, the direct labor cost is $7,900 and the overhead is $2,900, totaling $10,800. This total cost is then divided by the number of credit cards issued (1,200), yielding a cost of $9 per credit card.

To perform the calculation:
Cost per credit card = (Direct Labor + Overhead) / Number of credit cards issued
Cost per credit card = ($7,900 + $2,900) / 1,200
Cost per credit card = $10,800 / 1,200
Cost per credit card = $9