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31 March, 12:01

Miller Company's total sales are $120,000. The company's direct labor cost is $15,000, which represents 30% of its total conversion cost and 40% of its total prime cost. Its total selling and administrative expense is $18,000 and its only variable selling and administrative expense is a sales commission of 5% of sales. The company maintains no beginning or ending inventories and its manufacturing overhead costs are entirely fixed costs. Required:1. What is the total manufacturing overhead cost? 2. What is the total direct materials cost? 3. What is the total manufacturing cost? 4. What is the total variable selling and administrative cost? 5. What is the total variable cost? 6. What is the total fixed cost? 7. What is the total contribution margin?

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  1. 31 March, 14:35
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    1. Total manufacturing overhead cost = $35,000

    2. Total Direct Material cost = $22,500

    3. Total manufacturing cost = $72,500

    4. Total Variable Selling and Administrative Cost = $6,000

    5. Total variable cost = $43,500

    6. Total Fixed Cost = $47,000

    7. Total contribution margin = $76,500

    Explanation:

    Provided Sales = $120,000

    Direct labor Cost = $15,000 which = 30% of total conversion cost

    Total conversion cost = $15,000/30% = $50,000

    Conversion cost = Labor cost + Manufacturing cost, manufacturing cost = $50,000 - $15,000 = $35,000

    Provided Direct labor cost is 40% of total prime cost.

    Total prime cost = Direct material + direct labor = $15,000/40% = $37,500

    Direct material = $37,500 - $15,000 = $22,500

    Provided selling and distribution expense = $18,000

    Variable = Sales commission of 5% on sales = $120,000 X 5% = $6,000

    Fixed Selling expenses = $18,000 - variable $6,000 = $12,000

    Manufacturing Overhead cost is completely fixed = $35,000

    Now we have total manufacturing cost = material + labor + manufacturing overheads = $22,500 + $15,000 + $35,000 = $72,500

    Total variable cost = Material + labor + Selling & Administration

    = $22,500 + $15,000 + $6,000 = $43,500

    Total fixed cost = Manufacturing + Selling & Administrative

    = $35,000 + $12,000 = $47,000

    Total contribution margin = Selling Value - Total Variable Cost = $120,000 - $43,500 = $76,500

    Final Answer

    1. Total manufacturing overhead cost = $35,000

    2. Total Direct Material cost = $22,500

    3. Total manufacturing cost = $72,500

    4. Total Variable Selling and Administrative Cost = $6,000

    5. Total variable cost = $43,500

    6. Total Fixed Cost = $47,000

    7. Total contribution margin = $76,500
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