Here are selected data for Campbell Company: Manufacturing overhead is allocated at 60% of direct labor cost.
What was the amount of direct labor costs?

Question

Here are selected data for Campbell Company:  Manufacturing overhead is allocated at 60% of direct labor cost.
What was the amount of direct labor costs?

Quizplus · Accepted Answer

If we let x be the amount of direct labor costs, then manufacturing overhead (MOH) would be 0.6x. Using data from the problem, we can set up an equation:

Total manufacturing costs = Direct materials + Direct labor + MOH
$650,000 = $380,000 + x + 0.6x
$650,000 = $380,000 + 1.6x
$270,000 = 1.6x
x = $168,750

Therefore, the amount of direct labor costs is $168,750, which is closest to option C.

Here Are Selected Data for Campbell Company: Manufacturing Overhead