In May direct labor was 60% of conversion cost. If the manufacturing overhead for the month was $54,000 and the direct materials cost was $30,000, the direct labor cost was: a. $20,000 b. $45,000 c. $81,000 d. $36,000

The correct answer is C.

Explanation:

Giving the following information:

In May direct labor was 60% of conversion cost. If the manufacturing overhead for the month was $54,000.

We know that:

Conversion cost = direct labor + manufacturing overhead

If direct labor was 60% of conversion costs, overhead was 40%.

Rule of 3:

40%=54,000

60% = x

x = (0.60*54,000) / 0.40

x = 81,000

Direct labor = 81,000