Abburi Company's manufacturing overhead is 60% of its total conversion costs. If direct labor is $52,000 and if direct materials are $28,000, the manufacturing overhead is:

a. $42,000

b. $78,000

c. $34,667

d. $120,000

The correct answer is C.

Explanation:

Giving the following information:

Abburi Company's manufacturing overhead is 60% of its total conversion costs. Direct labor is $52,000.

We know that the conversion cost formula is:

Conversion cost = direct labor + manufacturing overhead

We need to use a rule of three:

60% = 52,000

100% = x

x = 1*52,000/0.6 = 86,667

Now we can calculate overhead:

86,667 = 52,000 + overhead

overhead = 34,667