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The Super Supply Company manufactures cleaning spray for public schools
The Super Supply Company manufactures cleaning spray for public schools. During
2012, the company spent $600,000 on prime costs and $800,000 on conversion costs.
Overhead is applied at a rate of 150% of direct labor costs. How much did the company
allocate (apply) for manufacturing overhead during 2012?
Expert Solution
Computation of the manufacturing overhead applied during 2012:-
Conversion costs = Direct labor cost + Manufacturing overheads
$800,000 = Direct labor cost + (150% * Direct labor cost)
Direct labor cost + (150% * Direct labor cost) = $800,000
250% * Direct labor cost = $800,000
Direct labor cost = $800,000 / 250%
= $320,000
Manufacturing overhead = 150% * Direct labor cost
= 150% * $320,000
= $480,000
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