Total production cost- #360,000 Factory overhead cost- #56,000 Selling price per unit- # 120 Production volume 4000 unitsDetermine the value of prime cost
Production volume 4000 unitsDetermine the value of prime cost
Answer Details
The prime cost is the sum of direct materials cost and direct labor cost. Direct materials cost is the cost of the raw materials used to produce a product, while direct labor cost is the cost of the labor used to produce the product. Factory overhead cost is the indirect costs of production and does not include direct materials or direct labor costs.
Therefore, to calculate the prime cost, we need to subtract the factory overhead cost from the total production cost:
Prime cost = Total production cost - Factory overhead cost
Prime cost = #360,000 - #56,000
Prime cost = #304,000
So, the value of prime cost is #304,000.