Apex Apparel Enterprises incurred the following expenses during the financial year ended 31st December 2025:
| Account Details | Amount (₦) |
|---|---|
| Opening inventory of raw materials | 45,000 |
| Purchases of raw materials | 230,000 |
| Carriage inwards on raw materials | 12,000 |
| Closing inventory of raw materials | 38,000 |
| Direct factory labour wages | 115,000 |
| Royalty paid on apparel designs | 18,000 |
| Factory supervisor's salary | 40,000 |
| Factory rent and rates | 25,000 |
| Depreciation of factory machinery | 15,000 |
What is the Prime Cost of production for Apex Apparel Enterprises?
Answer: 382000 ₦
Answer
The Prime Cost of production for Apex Apparel Enterprises is ₦382,000.
Prime Cost is the sum of all direct costs incurred in production: Direct Materials Consumed (₦45,000 + ₦230,000 + ₦12,000 - ₦38,000 = ₦249,000), Direct Labour (₦115,000), and Direct Expenses (₦18,000 for royalties). Totaling these yields ₦382,000. Factory overheads such as supervisor salary (₦40,000), factory rent (₦25,000), and machinery depreciation (₦15,000) are indirect manufacturing costs and are excluded from Prime Cost.
Step-by-Step Solution
Key Concept
Prime Cost consists of the sum of direct materials consumed, direct labour, and direct expenses (such as royalties). Indirect factory overheads must be excluded.