The Titan Enterprises Company manufactures cleaning spray for public schools. During 2020, 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 (apply) for manufacturing overhead during 2020?

Question

Quizplus · Accepted Answer

Prime costs include direct materials and direct labor. Conversion costs include direct labor and manufacturing overhead. Given that overhead is applied at 150% of direct labor costs, and knowing that prime costs are $600,000 and conversion costs are $800,000, we can deduce that direct labor is $320,000 (since $800,000 - $480,000 (overhead) = $320,000). Therefore, manufacturing overhead is 150% of $320,000, which equals $480,000.

The Titan Enterprises Company Manufactures Cleaning Spray for Public Schools