cost of direct labor is the total cost of workers involve in production divided by normal capacity is per unit direct labor cost.
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Predetermined overhead rate based on direct labor cost = Budgeted overhead cost / direct labor cost / 100 Predetermined overhead rate based on direct labor cost = budgeted overhead cost / direct labor hours.
Direct labor is a product cost because without labor no product can be produce and it has direct relation with production of goods.
To calculate the direct labor cost, we first need to determine the total conversion cost. Since direct labor is 40% of the conversion cost, indirect labor must be 60%. Therefore, the total conversion cost is 60000 / 0.6 = 100000. Since direct labor is 40% of the conversion cost, direct labor cost is 100000 * 0.4 = 40000. So, the direct labor cost is $40,000.
Direct labor is direct cost as it varies with variation in production level and directly related with number of units of product.
Yes conversion cost is sum of direct labor and overheads which required to run the process of production of units.