Question

Job 31 has a direct materials cost of $400 and a total manufacturing cost of $1,300. Overhead is applied to jobs at a rate of 200 percent of direct labor cost.

Use the relationships among total manufacturing costs, conversion cost, and prime cost to determine the following costs for job 31:

a. conversion costs

b. direct labor cost

c. manufacturing overhead costs

d. prime costs

Answer 1

• Part ‘a’

Conversion cost = Direct labor + Overheads
OR
Conversion cost = Total manufacturing cost – Direct material cost
= $ 1300 – $ 400
= $ 900 =Answer

• Part ‘b’

Direct labor cost [let it be ‘x’] = Conversion cost – Manufacturing Overhead cost
x= 900 – (200% of x)
x= 900 – 2x
2x + x = 900
3x = 900
x = 300

Direct labor cost = $ 300 =Answer

• Part ‘c’

Manufacturing Overhead cost = 200% of direct labor cost = 200% x $ 300 = $ 600 = Answer

• Part ‘d’

Prime Cost = Direct material cost + Direct Labor cost
= $ 400 + $ 300
= $ 700 = Answer