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24 July, 17:56

Abburi Company's manufacturing overhead is 60% of its total conversion costs. If direct labor is $52,000 and if direct materials are $28,000, the manufacturing overhead is:

a. $42,000

b. $78,000

c. $34,667

d. $120,000

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  1. 24 July, 18:08
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    The correct answer is C.

    Explanation:

    Giving the following information:

    Abburi Company's manufacturing overhead is 60% of its total conversion costs. Direct labor is $52,000.

    We know that the conversion cost formula is:

    Conversion cost = direct labor + manufacturing overhead

    We need to use a rule of three:

    60% = 52,000

    100% = x

    x = 1*52,000/0.6 = 86,667

    Now we can calculate overhead:

    86,667 = 52,000 + overhead

    overhead = 34,667
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