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    LittleMiss1962's Avatar
    LittleMiss1962 Posts: 8, Reputation: 1
    New Member
    		  
    #1

    Apr 9, 2007, 08:18 AM
    importance of manufacturing overhead allocation
    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's Avatar
    RubyPitbull Posts: 3,575, Reputation: 648
    Ultra Member
    		  
    #2

    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's Avatar
    LittleMiss1962 Posts: 8, Reputation: 1
    New Member
    		  
    #3

    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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