Question

Craigmont company's direct materials costs are $3,000,000, its direct labor costs total $7,000,000, and its factory overhead costs total $5,000,000. its prime costs total:_________

Answer 1

10,000,000.00 is the prime cost of Craigmont company's direct materials

Statement showing Computations  

Particulars                                               Amount

Q1  

direct materials costs                               3,000,000.00

direct labor costs                                        7,000,000.00

prime costs                                                10,000,000.00

Prime costs are a firm's expenses directly related to the materials and labor used in production. It refers to a manufactured product's costs, which are calculated to ensure the best profit margin for a company. The prime cost calculates the direct costs of raw materials and labor that are involved in the production of a good. Direct costs do not include indirect expenses, such as advertising and administrative costs.

Formula and Calculation of Prime Cost

Prime cost = Direct raw materials + Direct labor

• 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.

• Businesses need to calculate the prime cost of each product manufactured to ensure they are generating a profit.

Learn more about prime cost here

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