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During the month of July, direct labor cost totaled $12,000 and direct labor cost was 30% of prime cost. If total manufacturing costs during July were $86,000, the manufacturing overhead was_______?

Question

During the month of July, direct labor cost totaled 12,000anddirectlaborcostwas3012,000 and direct labor cost was 30% of prime cost. If total manufacturing costs during July were 86,000, the manufacturing overhead was_______?

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Solution

To solve this problem, we need to follow these steps:

  1. First, we need to find the prime cost. Since we know that direct labor cost was 30% of prime cost, we can set up the equation 0.30 * Prime cost = 12,000.SolvingforPrimecost,wegetPrimecost=12,000. Solving for Prime cost, we get Prime cost = 12,000 / 0.30 = $40,000.

  2. Next, we need to find the direct materials cost. We know that Prime cost is the sum of direct materials cost and direct labor cost. So, Direct materials cost = Prime cost - Direct labor cost = 40,00040,000 - 12,000 = $28,000.

  3. Finally, we can find the manufacturing overhead. We know that Total manufacturing costs is the sum of direct materials cost, direct labor cost, and manufacturing overhead. So, Manufacturing overhead = Total manufacturing costs - Direct materials cost - Direct labor cost = 86,00086,000 - 28,000 - 12,000=12,000 = 46,000.

So, the manufacturing overhead during July was $46,000.

This problem has been solved

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