what is prime cost and how its calculated?
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A prime cost is the total direct costs of production, including raw materials and labor. Indirect costs, such as utilities, manager salaries, and delivery costs, are not included in prime costs. The prime cost equation is equal to the cost of raw materials plus direct labor.Prime costs and conversion costs have direct labor cost as an overlapping item. Formula. ...
Conversion costs = direct labor cost + manufacturing overhead costs. Manufacturing overhead costs are all indirect manufacturing costs. ...
Timber consumed = opening stock + purchases − closing stock = $50 + $2,000 − $250 = $1,800.
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