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 86,000, the manufacturing overhead was_______?
Solution
To solve this problem, we need to follow these steps:
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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 / 0.30 = $40,000.
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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 = 12,000 = $28,000.
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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 = 28,000 - 46,000.
So, the manufacturing overhead during July was $46,000.
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