Final answer:
Option (A), The unit cost for Job #420 is calculated by adding direct materials, direct labor, and overhead costs and dividing by the number of units produced. With an overhead rate of 120% on the direct labor cost, the per-unit cost works out to be $2.00.
Step-by-step explanation:
The unit cost of Job #420 can be calculated by adding together the direct materials cost, direct labor cost, and the predetermined overhead cost and then dividing by the number of units produced.
The company's predetermined overhead rate is 120% of direct labor cost.
Therefore, the overhead cost for Job #420 would be 120% of $5,000 (direct labor cost), which is $6,000.
The total job cost is the sum of direct materials, direct labor, and overhead cost,
which amounts to $4,000 + $5,000 + $6,000 = $15,000 for Job #420.
Dividing the total job cost by the number of units (7,500) results in a unit cost of $2.00 per unit.
Therefore, the answer to the student's question is A. $2.00.