Question

assume (1) the direct labor cost of $40,000 is 25% of total conversion costs and 40% of total prime costs, (2) the total selling and administrative expense is $62,000, (3) the only variable selling and administrative expense is sales commissions of 4% of sales, (4) all manufacturing overhead costs are fixed costs, and (5) there are no beginning or ending inventories.what is the total manufacturing overhead cost?

Answer 1

The total manufacturing overhead cost is calculated by determining the total conversion costs, which is the sum of direct labor and manufacturing overhead, and then subtracting the direct labor cost. Given that direct labor is 25% of conversion costs, the total conversion costs are $160,000, and so the manufacturing overhead cost is $120,000.

Step-by-step explanation:

To find the total manufacturing overhead cost, we need to understand the concept of conversion costs and prime costs. Conversion costs include manufacturing overhead and direct labor, while prime costs consist of direct labor and direct materials. Given that the direct labor cost of $40,000 is 25% of the total conversion costs, we can calculate the total conversion costs:

• Total conversion costs = Direct labor cost / 25%
• Total conversion costs = $40,000 / 0.25
• Total conversion costs = $160,000

Since manufacturing overhead makes up the rest of the conversion costs after direct labor, we can calculate it as follows:

• Manufacturing overhead = Total conversion costs - Direct labor cost
• Manufacturing overhead = $160,000 - $40,000
• Manufacturing overhead = $120,000

This calculation shows that the total manufacturing overhead cost is $120,000.