Mary Cosmetics sells specialty lipstick for a retail price of $12.25 each. Mary purchases each tube for $5.00 and pays the following additional amounts: $1.50 per tube in freight charges, $0.40 per tube in taxes, and $2 per tube in commissions to employees for sales.

Compute the cost of each tube of lipstick.

The cost of goods produced or purchased includes all the costs of raw materials, the cost of work-in-process inventory, the cost of finished goods inventory, the cost of direct labor, indirect overhead cost, etc and excludes all the costs that are incurred for the goods to be sold as these costs are incurred in the cost of the goods sold and not the cost of goods purchased.