Asked by Nathalie Almonte on Jun 20, 2024
Verified
Williams Company's direct labour cost is 25% of its conversion cost. If the manufacturing overhead cost for the last period was $45,000 and the direct materials cost was $25,000, the direct labour cost was:
A) $33,333.
B) $15,000.
C) $20,000.
D) $60,000.
Conversion Cost
The combined costs of direct labor and manufacturing overhead that are incurred to convert raw materials into finished goods.
Direct Labour Cost
The total cost of wages paid to workers directly involved in manufacturing a product or providing a service.
Manufacturing Overhead
The indirect costs related to manufacturing that are not directly tied to a specific product, such as utilities, rent, and salaries of maintenance staff.
- Recognize and organize the constituents of prime cost and conversion cost into categories.
Verified Answer
JT
Jodyne TriplettJun 25, 2024
Final Answer :
B
Explanation :
Direct labour cost is 25% of conversion cost, meaning direct labour is 1/3 of the total conversion cost (since conversion cost = direct labour + manufacturing overhead, and if direct labour is 25%, then manufacturing overhead is 75%, making the ratio of direct labour to total conversion cost 1:3). Given the manufacturing overhead cost is $45,000, the total conversion cost is $45,000 / 0.75 = $60,000. Therefore, the direct labour cost is $60,000 * 0.25 = $15,000.
Learning Objectives
- Recognize and organize the constituents of prime cost and conversion cost into categories.