Question

Abburi company's manufacturing overhead is 60% of its total conversion costs. If direct labor is $40,000 and if direct materials are $26,600, the manufacturing overhead is:

Answer 1

Calculation of Abburi Company’s manufacturing overhead:

It is given that company's manufacturing overhead is 60% of its total conversion costs. And Conversion cost is a sum of Direct Material and Direct Labor costs. Hence we can say that:

Manufacturing overhead = (Direct Material + Direct Labor Costs)*60%

= (26600+40000)*+60%

= 39960

Hence, Abburi Company’s manufacturing overhead is $39,960