Question

Compute Prime Cost:
Direct material = Rs. 24,000
Direct labour = Rs. 15,000
Direct expenses = Rs. 12,000
Other overheads = Rs. 40,000

Hint:

To avoid simple errors on your exams, remember that Prime Cost only contains direct costs. Always ignore overheads (whether they are factory, administration, or selling overheads) when calculating Prime Cost. Overheads are added after the Prime Cost stage to determine the Works Cost and Cost of Production: $$\text{Works Cost} = \text{Prime Cost} + \text{Factory Overheads}$$

Answer 1