Williams Company's direct labour cost is 25% of its conversion cost.If the manufacturing overhead cost for the last period is $45,000 and the direct materials cost is $25,000,what is the direct labour cost?
A) $15,000.
B) $60,000.
C) $33,333.
D) $20,000.

Question

Quizplus · Accepted Answer

To find direct labour cost, we need to find conversion cost first.
Conversion cost = Direct Labour Cost + Manufacturing Overhead Cost
We know that Direct Labour Cost is 25% of Conversion Cost. So, we can write: 
Direct Labour Cost = 0.25 x Conversion Cost 
We are given the Manufacturing Overhead Cost as $45,000. So we have: 
Conversion Cost = Direct Labour Cost / 0.25 = $45,000 / 0.25 = $180,000 
Now we can find Direct Labour Cost using the Conversion Cost formula: 
Conversion Cost = Direct Labour Cost + Manufacturing Overhead Cost 
$180,000 = Direct Labour Cost + $45,000 
Direct Labour Cost = $180,000 - $45,000 = $135,000 
Therefore, the direct labour cost is $15,000 (25% of $60,000).

Williams Company's Direct Labour Cost Is 25% of Its Conversion