The Super Supply Company manufactures cleaning spray for public schools.During 2010,the company spent $600,000 on prime costs and $800,000 on conversion costs.Overhead is applied at a rate of 150% of direct labor costs.How much did the company allocate for manufacturing overhead during 2010?

Question

Quizplus · Accepted Answer

Prime costs include direct materials and direct labor. Conversion costs include direct labor and manufacturing overhead. If overhead is 150% of direct labor, and knowing prime costs are $600,000, we can deduce direct labor costs. Let direct labor be X, then direct materials are $600,000 - X. Conversion costs are $800,000 = X + 1.5X (overhead), solving gives X = $320,000 (direct labor), so overhead is 1.5 * $320,000 = $480,000.

The Super Supply Company Manufactures Cleaning Spray for Public Schools