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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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Answer:

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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