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In May direct labor was 60% of conversion cost. If the manufacturing overhead for the month was $54,000 and the direct materials cost was $30,000, the direct labor cost was: a. $20,000 b. $45,000 c. $81,000 d. $36,000

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Answer:

The correct answer is C.

Explanation:

Giving the following information:

In May direct labor was 60% of conversion cost. If the manufacturing overhead for the month was $54,000.

We know that:

Conversion cost= direct labor + manufacturing overhead

If direct labor was 60% of conversion costs, overhead was 40%.

Rule of 3:

40%=54,000

60%= x

x= (0.60*54,000)/0.40

x= 81,000

Direct labor= 81,000

The correct option is c. $81,000.

  • The calculation is as follows:

Let us assume Conversion cost be X

Then, Direct labor cost = Conversion cost × 60%

= X × 0.60

= 0.60X

Now

Conversion cost = Direct labor cost + Manufacturing overhead

X = 0.60X + $54,000

X - 0.60X + $54,000

0.40X = $54,000

= $54,000 ÷ 0.40  

= $135,000

Now  

Direct labor cost = 0.60X

= 0.60 ($135,000)

= $81,000

Learn more: brainly.com/question/17429689

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