A company's prime costs total $4,680,000 and its conversion costs total $5,700,000. If direct materials are $2,220,000, calculate the overhead costs:
a. 2,460,000
b.$1,020,000
c.$2,220,000
d.$3,480,000
e.$3,240,000
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Prime Costs = Direct Materials + Direct Labor Direct Labor = Prime Costs - Direct Materials Direct Labor = $4,680,000 - $2,220,000 Direct Labor = $2,460,000 Conversion Costs = Direct Labor + Overhead Costs Overhead Costs = Conversion Costs - Direct Labor Overhead Costs = $5,700,000 - $2,460,000 Overhead Costs = $3,240,000 The answer is e. $3,240,000
Prime Costs - Direct Materials = Direct Labor
$4,680,000 - 2,220,000 = 2,460,000
Conversion Costs - Direct Labor = Overhead Costs
$5,700,000 - 2,460,000 = $3,240,000
Correct answer: e.$3,240,000
[1] Prime Costs = Direct Materials + Direct Labor
$4,680,000 = $2,220,000 + 'Direct Labor'
Direct Labor = $4,680,000 - $2,220,000 = $2,460,000
[2] Conversion Costs = Direct Labor + Overhead Costs
$5,700,000 = $2,460,000 + 'Overhead Costs'
Overhead Costs = $5,700,000 - $2,460,000 = $3,240,000
The answer is e. $3,240,000
Prime Costs = Direct materials + Direct Labor
4,680,000 = 2,220,000 + Direct Labor
Direct Labor = 4,680,000 - 2,220,000
Direct Labor = 2,460,000
Conversion Costs = Direct Labor + Overhead
5,700,000 = 2,460,000 + Overhead
Overhead = 5,700,000 - 2,460,000
Overhead = 3,240,000
The answer is letter E) $3,240,000
Prime Costs consist of Direct Materials and Direct Labor.
Conversion Cost consist of Direct Labor and Overhead Costs
Prime cost is given as $4,680,000
Conversion Cost is given as $5,700,000
Direct Materials is given as $2,220,000
Therefore, we can utilize knowledge of the components of both prime costs and conversion costs and use basic algebraic expressions.
First,
Direct Materials (2,220,000) +Direct Labor (X)= Prime Costs (4,680,000);
solve for direct labor, DL
DL would then = $2,460,000 because Prime Costs- DM = DL
Then,
We could use direct labor and conversion cost to then solve for Overhead Cost.
Direct Labor (2,460,000) + Overhead Cost (X) = Conversion Cost (5,700,000)
Solve for OH, Overhead Cost.
OH= $3,240,000 because Conversion Cost (5,700,000)-Direct Labor (2,460,000) =$3,240,000
The answer is E. Overhead Cost is $3,240,000
Prime Costs = Direct Materials + Direct Labor ---> (4,680,000 = 2,220,000 + Direct Labor)
Direct Labor = 4,680,000 - 2,220,000 ---> (Direct Labor = 2,460,000)
Conversion Costs = Direct Labor + Overhead ---> (5,700,000 = 2,460,000 + Overhead)
Overhead = 5,700,000 - 2,460,000
Answer: E) Overhead cost is $3,240,000
Prime costs = Direct materials + Direct labor Prime costs = $4,680,000
Less: Direct materials = $2,220,000
= Direct labor = $2,460,000
Conversion costs = Direct labor + Overhead costs Conversion costs = $5,700,000
Less: Direct labor = $2,460,000
= Overhead costs = $3,240,000 Answer: e. $3,240,000
Prime Costs $4,680,000 = ($2,220,000 + Direct Labor)
Direct Labor = $2,460,000
Conversion Costs $5,700,000 = ($2,460,000 + Overhead)
Overhead = $3,240,000