Miller Company\'s total sales are $180,000. The company\'s direct labor cost is

Question

Miller Company's total sales are $180,000. The company's direct labor cost is $21,600, which represents 30% of its total conversion cost and 40% of its total prime cost. Its total selling and administrative expense is $27,000 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? 1. Total manufacturing overhead cost 2. Total direct materials cost 3. Total manufacturing cost 4. Total variable selling and administrative cost 5. Total variable cost 6. Total fixed cost 7. Total contribution margin

Explanation / Answer

Requirement 1 Conversion cost Includes Direct labor and overhead cost Direct labor is 30% of Conversion Cost So, Total manufacturing overhead cost is 70% of Conversion Cost Conversion Cost = 21,600/30% Conversion Cost = 72,000 Total Manufacturing Overhead Cost = 72,000 *70% = $50,400 Requirement 2 Prime Cost includes Direct materials and Direct Labor Prime Cost = 21,600/40% Prime Cost = 54,000 Total direct materials cost = 54,000*60% = $ 32,400 Requirement 3 Total Manufacturing cost = Direct Materials + Direct Labor+ Manufacturing Overhead Cost =32,400+21,600+50,400 =104,400 Requirement 4 Total Variable selling and administrative Cost is Sales Commission Sales Commission = Sales X5% = 180,000 X5% = 9,000 Requirement 5 Variable cost: Direct Materials cost      32,400 Direct Labor cost      21,600 Selling and administrative Cost        9,000 Total Variable Cost      63,000 Requirement 6 Fixed cost: Manufacturing overhead cost      50,400 Selling and administrative Cost      18,000 Total Fixed Cost      68,400 Requirement 7 Sales 1,80,000 Less: Total variable cost      63,000 Total Contribution margin 1,17,000

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