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Direct Cost:
These are all those costs which directly related and allocatable to manufacturing of units of products like direct material (raw meterial), Direct labor (Salaries or wages of workforce) etc.
Indirect Cost:
These are those costs which are not directly allocatable to manufacturing of units of products like salary of line manager in factory or supervisors salary etc.
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What is the direct labor cost if a company's direct labor is 40 percent of its conversion cost and the manufacturing overhead cost for the last period was 60000 and the direct materials cost was 30000?
60000 + 30000 = 90000 = 60% / 60 = 1500 = 1% x 100 = 150000 = 100% X .4 = 60000 The above solution is incorrect. By definition, the conversion cost is the sum of the direct labor cost and the overhead. Therefore, if we assume x is the conversion cost, then x = 0.4x + 60,000. The solution is conversion cost = 100,000. Hence, the direct labor cost = 40,000. Note that the knowing the direct material cost is not necessary for the computation of the labor cost. I am really bad at math so i just have to think you are right on this one
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What is the direct labor cost if a company's direct labor is 40 percent of its conversion cost and the manufacturing overhead cost for the last period was 60000 and the direct materials cost was 30000?
60000 + 30000 = 90000 = 60% / 60 = 1500 = 1% x 100 = 150000 = 100% X .4 = 60000 The above solution is incorrect. By definition, the conversion cost is the sum of the direct labor cost and the overhead. Therefore, if we assume x is the conversion cost, then x = 0.4x + 60,000. The solution is conversion cost = 100,000. Hence, the direct labor cost = 40,000. Note that the knowing the direct material cost is not necessary for the computation of the labor cost. I am really bad at math so i just have to think you are right on this one
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