Job 31 has a direct materials cost of $300 and a total manufacturing cost of $900. Overhead is applied to jobs at a rate of 200 percent of direct labor cost.
Use the relationships among total manufacturing costs, conversion cost, and prime cost to determine the following costs for job 31:
1. Conversion Cost?
2. Direct Labor Cost?
3. Manufacturing overhead cost?
4. Prime cost?
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To determine the costs for job 31, we need to understand the relationships among total manufacturing costs, conversion cost, direct labor cost, manufacturing overhead cost, and prime cost. Let's break it down:
1. Conversion Cost:
Conversion cost represents the expenses incurred to convert direct materials into finished goods. It includes both direct labor and manufacturing overhead costs. To find the conversion cost, we need to subtract the direct materials cost from the total manufacturing cost.
Conversion Cost = Total Manufacturing Cost - Direct Materials Cost
Conversion Cost = $900 - $300
Conversion Cost = $600
2. Direct Labor Cost:
Direct labor cost is the cost of labor directly involved in the production process. To calculate the direct labor cost, we use the relationship between conversion cost and total manufacturing cost.
Direct Labor Cost = Conversion Cost - Manufacturing Overhead Cost
Direct Labor Cost = $600 - Manufacturing Overhead Cost
3. Manufacturing Overhead Cost:
Manufacturing overhead cost is the total of all costs other than direct materials and direct labor costs that are incurred in the production process. In this case, overhead is applied to jobs at a rate of 200 percent of direct labor cost. We have the direct labor cost equation from step 2, so we can substitute it here.
Manufacturing Overhead Cost = 200% of Direct Labor Cost
Manufacturing Overhead Cost = 200% of ($600 - Manufacturing Overhead Cost)
To solve for Manufacturing Overhead Cost, we can set up the equation and solve it:
Manufacturing Overhead Cost = 200% of ($600 - Manufacturing Overhead Cost)
Manufacturing Overhead Cost = 2 * ($600 - Manufacturing Overhead Cost)
Manufacturing Overhead Cost = $1200 - 2 * Manufacturing Overhead Cost
3 * Manufacturing Overhead Cost = $1200
Manufacturing Overhead Cost = $400
4. Prime Cost:
Prime cost is the sum of direct materials and direct labor costs. We already have both of these costs from step 1 and step 2.
Prime Cost = Direct Materials Cost + Direct Labor Cost
Prime Cost = $300 + ($600 - Manufacturing Overhead Cost)
Now, we can calculate the costs for job 31:
1. Conversion Cost = $600
2. Direct Labor Cost = $600 - $400 = $200
3. Manufacturing Overhead Cost = $400
4. Prime Cost = $300 + ($600 - $400) = $500
So, the costs for job 31 are as follows:
1. Conversion Cost: $600
2. Direct Labor Cost: $200
3. Manufacturing Overhead Cost: $400
4. Prime Cost: $500