Question

1. Calculate the prime cost from the following information: Direct material purchased: Rs. 1,00,000 Direct material consumed: Rs. 90,000 Direct labour: Rs. 60,000 Direct expenses: Rs. 20,000 Manufacturing overheads: Rs. 30,000

Answer 1

Answer:

Prime cost = Raw material consumed + Direct labour + Direct expenses = 90000 + 60000 + 20000 = Rs. 170000.

Answer 2

Given,

Direct material purchased = Rs. 1,00,000.

Direct material consumed = Rs. 90,000.

Direct labor = Rs. 60,000.

Direct expenses = Rs. 20,000.

Manufacturing overheads = Rs. 30,000

To find,

The prime cost

Solution,

• The direct cost involved in the creation of a product is known as prime cost, and it often covers the direct production cost of items, such as raw materials and direct labor costs.
• It is mostly used to determine the cost and effective price of commodities.

Prime cost = Raw material consumed + Direct labor + Direct expenses

Prime cost = 90000 + 60000 + 20000

Prime cost = Rs. 170000.

Hence, the prime cost is Rs. 170000.