Central States Manufacturing produces a single product: Product 1222. The company has estimated that annual overhead expenses wll be $180,000 and production volume will be 20,000 units using 20,000 hours of labor. Overhead is applied to production based on assembly labor hours. The company has recorded the following transactions in February in its accounting records:
Paid assembly workers for 7,000 hours of work 70,000
Paid for factory supplies used 12,000
Raw materials used in production 24,000
Recorded machine depreciation expense of 12,000
Paid for electricity used 17,000
3,000 units of product were started and completed during February.
A. Calculate unit cost for Product 1222 using actual costing.
B. Calculate unit cost for Product 1222 using normal costing.
C. Why might the company decide to use normal costing rather than actual costing?