During the month of April, direct labor cost totaled $15,000 and direct labor cost was 30% of prime cost. If total manufacturing costs during April were $79,000, the manufacturing overhead was:
A)$35,000
B)$29,000
C)$50,000
D)$129,000

Question

Quizplus · Accepted Answer

We know that direct labor cost is 30% of prime cost, so if we let x be the prime cost, then:

0.30x = $15,000
x = $50,000

Now we can use the formula:

Total Manufacturing Costs = Direct Materials + Direct Labor + Manufacturing Overhead

And solve for the manufacturing overhead:

$79,000 = Direct Materials + $15,000 + Manufacturing Overhead
Manufacturing Overhead = $79,000 - $15,000 - Direct Materials

Since we don't have information about the direct materials, we cannot directly calculate the manufacturing overhead. However, we can eliminate choices A, C, and D because they are higher than the total manufacturing costs, which is not possible. This leaves us with choice B, which is the only one that is lower than the total manufacturing costs and therefore a possible answer.

During the Month of April, Direct Labor Cost Totaled $15,000