importance of manufacturing overhead allocation

LittleMiss1962 · #1 Apr 9, 2007, 08:18 AM

Hello,

I am having a problem with this.

How would you figure out the following:

Cost of product = direct materials + direct labor + manufacturing overhead

If the numbers you had to work with were:

direct materials = 7%
direct labor = 13
manufacturing materials = 80
100%

I don't know how to figure out the 7%. What is it 7% of?? I'm confused. Any help would be greatly appreciated. Thank you in advance.

RubyPitbull · Apr 9, 2007, 08:42 AM

The 7% is that portion of the 100%. Your direct materials and manufacturing materials are also percentage items even though the % figure isn't listed. If you insert the %, add up all three of your costs, they equal 100%.

So, let's use as an example 100% = $100. Using what you have been given:

direct materials = $7
direct labor = $13
manufacturing materials = $80

Using the figures above, the cost of product is $100.

Does that help in making this less confusing to you?

LittleMiss1962 · Apr 9, 2007, 05:37 PM

Quote:

Originally Posted by RubyPitbull

The 7% is that portion of the 100%. Your direct materials and manufacturing materials are also percentage items even though the % figure isn't listed. If you insert the %, add up all three of your costs, they equal 100%.

So, let's use as an example 100% = $100. Using what you have been given:

direct materials = $7
direct labor = $13
manufacturing materials = $80

Using the figures above, the cost of product is $100.

Does that help in making this less confusing to you?

Thank you so much for the help. I appreciate it so much



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