Company's manufacturing overhead is 20% of it's total conversion cost. If direct labor is $45,000 and direct materials are $53,000, the manufacturing overhead is? How do I figure this?
Company's manufacturing overhead is 20% of it's total conversion cost. If direct labor is $45,000 and direct materials are $53,000, the manufacturing overhead is? How do I figure this?
Conversion costs consist of direct labor and factory overhead. You can ignore the direct materials. It was just included to try to confuse you.
Overhead=.20(45,000+Overhead)
Overhead=.20 Overhead + 9,000
.80 Overhead = 9,000
Overhead = 11,250
Conversion Costs = 11,250+45,000=56,250
Overhead = 56,250*.20=11,250
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