Use the following information to answer the given question \(\begin{array}{c|c} & N \\ \hline \text{Opening stock of raw materials} & 8,000\\ \text{Purchase...
Question 1 Report
Use the following information to answer the given question
\(\begin{array}{c|c} & N \\ \hline \text{Opening stock of raw materials} & 8,000\\ \text{Purchases} & 45,000 \\ \text{Closing stock of raw materials} & 9,500 \\ \text{Direct wages} & 6,450 \\ \text{Indirect wages} & 2,800 \\ \text{Depreciation - Plant and Machinery} & 3,200 \\ \text{Factory rents and rates} & 350 \\ \text{Opening work-in-progress} & 3,250 \\ \text{Closing work-in-progress} & 3,750\end{array}\)
Prime cost is N53,000
\(\begin{array}{c|c} & N \\ \hline \text{Opening stock of raw materials} & 8,000\\ \text{Purchases} & 45,000 \\ \text{Closing stock of raw materials} & 9,500 \\ \text{Direct wages} & 6,450 \\ \text{Indirect wages} & 2,800 \\ \text{Depreciation - Plant and Machinery} & 3,200 \\ \text{Factory rents and rates} & 350 \\ \text{Opening work-in-progress} & 3,250 \\ \text{Closing work-in-progress} & 3,750\end{array}\)
Prime cost is N53,000
Answer Details
Prime cost is the sum of direct materials and direct labor cost. From the given information, the direct wages cost is N6,450 and the opening and closing stock of raw materials is N8,000 and N9,500 respectively. Therefore, the direct materials cost is:
Direct materials cost = Opening stock of raw materials + Purchases - Closing stock of raw materials
Direct materials cost = N8,000 + N45,000 - N9,500
Direct materials cost = N43,500
Hence, the prime cost can be calculated as follows:
Prime cost = Direct materials cost + Direct wages
Prime cost = N43,500 + N6,450
Prime cost = N49,950
Therefore, the correct option is (iii) N49,950.
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