Question

abburi Company's manufacturing overhead is 40% of its total conversion costs. If direct labor is $86,400 and if direct materials are $23,200, the manufacturing overhead is:

Answer 1

Answer:

Manufacturing overhead= $57,600

Explanation:

To calculate the Conversion costs, we need to use the following formula:

Conversion costs= direct labor + manufacturing overhead

Now, if direct labor is 60% of conversion costs, then:

Conversion costs= direct labor / (1 -  0.4)

Conversion costs= 86,400 / 0.6

Conversion costs= $144,000

Finally, we determine the manufacturing overhead:

Manufacturing overhead= 144,000 - 86,400

Manufacturing overhead= $57,600