A company's prime costs total $4,500,000 and its conversion costs total $5,500,000. If direct materials are $2,000,000, calculate the overhead costs:
A) $3,000,000.
B) $1,000,000.
C) $2,000,000.
D) $2,500,000.
E) $3,500,000.

Question

Quizplus · Accepted Answer

Prime costs = Direct materials + Direct labor$4,500,000 = $2,000,000 + Direct laborDirect labor = $4,500,000 - $2,000,000 = $2,500,000Conversion costs = Direct labor + Overhead costs$5,500,000 = $2,500,000 + Overhead costsOverhead costs = $5,500,000 - $2,500,000 = $3,000,000

A Company's Prime Costs Total $4,500,000 and Its Conversion Costs