Ironstone Inc. produces ceramic coffee mugs and pencil holders. Manufacturing overhead is assigned to production using an application rate based on direct labor hours.

Required:
a. For 2022, the company’s cost accountant estimated that total overhead costs incurred would be $210,000 and that a total of 28,000 direct labor hours would be worked. Calculate the amount of overhead to be applied for each direct labor hour worked on a production run.
b. A production run of 250 coffee mugs used raw materials that cost $270 and used 30 direct labor hours at a cost of $9.50 per hour. Calculate the cost of each coffee mug produced.
c. At the end of August 2022, 175 coffee mugs made in the production run in b had been sold and the rest were in ending inventory. Calculate (1) the cost of the coffee mugs sold that would have been reported in the income statement and (2) the cost included in the August 31, 2022, finished goods inventory.