₦Manufacturing wages42,000Factory rent880Raw materials: Stock 1/1/161,000Purchases16,000Stock 31/12/161,400Depreciation of Plants and…

JAMB Accounting 2023 53 views

₦Manufacturing wages42,000Factory rent880Raw materials: Stock 1/1/161,000Purchases16,000Stock 31/12/161,400Depreciation of Plants and…

₦
Manufacturing wages 42,000
Factory rent 880
Raw materials: Stock 1/1/16 1,000
Purchases 16,000
Stock 31/12/16 1,400
Depreciation of Plants and Machinery 800
Royalties 300
Indirect wages 18,000
General indirect expenses 620

The prime cost is

  1. ₦78,200
  2. ₦57,900 ✓
  3. ₦45,000
  4. ₦42,000

Explanation

Prime cost = Direct materials + Direct labor + Direct expenses. Raw materials consumed = ₦15,600 (from previous calculation). Manufacturing wages = ₦42,000. Royalties = ₦300 (direct expense).

Total prime cost: ₦15,600 + ₦42,000 + ₦300 = ₦57,900. Factory rent, depreciation, and indirect wages are overhead costs, not prime cost.

Remember: Prime cost includes only DIRECT costs that vary with production volume.

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