Question

The Titan Enterprises Company manufactures cleaning spray for public schools. During 2020, the company spent $960,000 on prime costs and $980,000 on conversion costs. Overhead is allocated at a rate of 150% of direct labor costs. How much did the company allocate for manufacturing overhead during 2020

Answer 1

Answer:

$585,000

Explanation:

Given that

Prime costs = $960,000

Conversion costs = $980,000.

Overhead costs = 150% of direct labor costs.

As we know that

Prime costs = Direct material cost + Direct labor cost

So,

Direct material cost + Direct labor cost = $960,000

And,

Conversion costs = Direct labor cost + Manufacturing overhead.

$980,000 = Direct labor cost + 150% of direct labor.

2.5 direct labor cost = $980,000

Direct labor cost = $980,000 ÷ 2.5

= $392,000

So,  

Manufacturing overhead is

= $392,000  × 150%

= $585,000