Miller Companys total sales are 153000 The companys direct l

Miller Company’s total sales are $153,000. The company’s direct labor cost is $18,360, which represents 30% of its total conversion cost and 40% of its total prime cost. Its total selling and administrative expense is $22,950 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?

Solution

1 Total manufacturing overhead cost: $42840 Direct labor = $18360 = 30% of total conversion cost Total conversion cost = $18360 / 30% = $61200 Total conversion cost = Direct labor + Manufacturing overhead Manufacturing overhead = Total conversion cost - Direct labor = $61200 - $18360 = $42840 2 Total direct materials cost: $27540 Direct labor = $18360 = 40% of total prime cost Total prime cost = $18360 / 40% = $45900 Total prime cost = Direct material + Direct labor Direct material = Total prime cost - Direct labor = $45900 - $18360 = $27540 3 Total manufacturing cost: $88740 Total manufacturing cost = Direct materials + Direct labor + Manufacturing overhead = $27540 + $18360 + $42840 = $88740 4 Total variable selling and administrative cost: $7650 Variable selling and administrative cost = Sales commission = 5% x $153000 = $7650 5 Total variable cost: $53550 Total variable cost = Direct materials + Direct labor + Sales commission = $27540 + $18360 + $7650 = $53550 6 Total fixed cost: $58140 Total fixed cost = Manufacturing overheads + Fixed selling and administrative expense Fixed selling and administrative expense = Total selling and administrative expense - Sales commission = $22950 - $7650 = $15300 Total fixed cost = $42840 + $15300 = $58140 7 Total contribution margin: $99450 Total contribution margin = Sales - Total variable cost = $153000 - $53550 = $99450