Detailed Answer
Answer (D) is correct.
Cost of goods sold is based on the manufacturing costs incurred in
production but does not include selling or general and administrative
expenses. Manufacturing costs equal $38,500 [$13,700 DM + $4,800 DL
+ (800 hours x $25) OH]. Thus, per-unit cost is $5.50 ($38,500 / 7,000
units).