Jef Machine Shop manufactures jacks and other lifting equipment. One order comes from Jun, Inc. for 2,000 jacks, which showed the following costs per unit:

Materials 40.00

Labor 17.50

FOH is 160% of direct labor cost (with 10% allowance for reworking defective units)

Final inspection revealed that 150 of the jacks were not properly produced. Correction of each unit requires 2.00 for materials, 3.00 for labor and factory overhead at an appropriate rate.

1. If defect is the result of internal failure, what is the cost of each unit of jacks produced?

 

2. If defect is the result of change in specifications imposed by the customer, what is the cost of each unit of jacks produced?