Question

During the month of September, direct labor cost totaled $11,000 and direct labor cost was 40% of prime cost. If total manufacturing costs during September were $73,000, the manufacturing overhead was:
(A) $16,500
(B) $27,500
(C) $62,000
(D) $45,500

Answer 1

Answer:

The correct answer is D: Manufacturing overhead= $45500

Explanation:

Giving the following information, we need to calculate the amount of manufacturing head.

Direct labor= $11000

Direct labor is 40% of prime costs

Total manufactured cost is= $73000

First, we need to calculate the direct material:

Prime cost= direct material + direct labor

If direct labor is 40% of prime costs, then:

Direct material=(11000*60/40=16500

Now, the manufactured cost formula is:

Manufactured cost= direct material + direct labor  + manufacturing overhead

By rearranging the formula:

Manufacturing overhead= Manufactured costs - direct material - direct labor= 73000- 16500-11000=$45500