During the month of May, direct labor cost totaled $10,000 and direct labor cost was 40% of prime cost.If total manufacturing costs during May were $86,000, the manufacturing overhead was:

A) $76,000
B) $25,000
C) $61,000
D) $15,000

Question

DANIEL RODAS-FALLA · Accepted Answer

Final Answer : C, Explanation :  First, we need to find the prime cost. We know that direct labor cost is 40% of prime cost, so we can set up the equation:Direct labor cost = 0.4 x Prime cost$10,000 = 0.4 x Prime costPrime cost = $25,000Now we can use the formula for calculating total manufacturing cost:Total manufacturing cost = Direct materials + Direct labor + Manufacturing overheadWe know that direct labor was $10,000, and we just calculated that prime cost was $25,000. So we can rearrange the formula to solve for manufacturing overhead:Manufacturing overhead = Total manufacturing cost - Direct materials - Direct laborManufacturing overhead = $86,000 - Direct labor - Prime costManufacturing overhead = $86,000 - $10,000 - $25,000Manufacturing overhead = $61,000Therefore, the answer is C) $61,000. Direct labor cost = $10,000Direct labor cost = 0.40 × Prime costTotal manufacturing cost = $86,000Direct labor cost = 0.40 × Prime costPrime cost = Direct labor cost ÷ 0.40Prime cost = $10,000 ÷ 0.40 = $25,000Total manufacturing cost = Prime cost + Manufacturing overhead cost$86,000 = $25,000 + Manufacturing overhead costManufacturing overhead cost = $61,000

During the month of May, direct labor cost totaled $10,000 and direct labor cost was 40% of prime cost.If total manufacturing costs during May were $86,000, the manufacturing overhead was:

A) $76,000
B) $25,000
C) $61,000
D) $15,000

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During the month of May, direct labor cost totaled $10,000 and direct labor cost was 40% of prime cost.If total manufacturing costs during May were $86,000, the manufacturing overhead was:A) $76,000B) $25,000C) $61,000D) $15,000

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Learning Objectives

Learning Objectives

Related questions

During the month of May, direct labor cost totaled $10,000 and direct labor cost was 40% of prime cost.If total manufacturing costs during May were $86,000, the manufacturing overhead was:

A) $76,000
B) $25,000
C) $61,000
D) $15,000