Question

Abburi Company's manufacturing overhead is 55% of its total conversion costs. If direct labor is $45,900 and if direct materials are $27,200, the manufacturing overhead is:

Answer 1

Answer:

Manufacturing Overheads = $56100

Explanation:

The conversion cost defined simply is the cost involved in turning the raw material or direct material into the finished products. Conversion cost is calculated by adding the direct labor cost and the manufacturing overhead cost.

Conversion cost = Direct labor + Manufacturing overheads

As we know that the manufacturing overhead is 55% of conversion cost, then the direct labor cost is 45% of conversion cost.

If 45% of conversion cost is $45900, then the total conversion cost will be,

Conversion cost = 45900 * 100/45   = $102000

Manufacturing Overheads = 102000 - 45900  = $56100