Question

If prime cost is Rs.24,000, office cost is Rs. 30,000, office overhead 50% of factory overhead than factory cost would be
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Answer 1

12000

Explanation:

30000-24000=6000

6000×100÷50=12000

Answer 2

Concept:

The cost of procuring raw materials and paying personnel in order to actually make a product is referred to as the prime cost. A company can estimate the price needed to break even or turn a profit by knowing the prime cost, which helps it to calculate its manufacturing expenses. While overhead expenses are related to indirect costs, prime costs are related to direct costs.

Overhead costs include:

Rent \Utilities \Insurance

office supplies

advertisement costs

Accounting costs

Law-related costs

Prime costs are continuing costs related to the actual production of a product that are required to maintain a firm. Prime prices may be stable or fluctuating. Regardless of the amount of production the company may reach in a given time period, fixed costs are expenses that stay the same.

Given:

Prime cost = 24,000

Office Cost = 30,000

Office overhead = 50% of factory overhead

Find:

Factory cost

Solution:

factory overhead = 30000-24000=6000

50/100 of factory overhead = office overhead

factory overhead = 6000×100/50=12000

Factory cost = 12,000

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