The following financial records were extracted from the books of Bayo Craftsmanship Ltd for the year ended 31 December 2025: | Account Item | Amount (\text{₦}) | |---|---| | Stock of raw materials (1 Jan 2025) | 15,000 | | Stock of raw materials (31 Dec 2025) | 12,000 | | Purchases of raw materials

The following financial records were extracted from the books of Bayo Craftsmanship Ltd fo… — JAMB UTME

The following financial records were extracted from the books of Bayo Craftsmanship Ltd for the year ended 31 December 2025:

Account Item	Amount ( $\text{₦}$ )
Stock of raw materials (1 Jan 2025)	$15,000$
Stock of raw materials (31 Dec 2025)	$12,000$
Purchases of raw materials	$85,000$
Carriage inwards on raw materials	$4,000$
Direct factory wages	$45,000$
Production royalties	$8,000$
Factory rent	$18,000$
Depreciation of factory plant	$6,000$

Calculate the total Prime Cost for the year in Naira ( $\text{₦}$ ).

Cevap: 145000 ₦

Cevap

The Prime Cost for the year is ₦145,000.

Prime Cost is the sum total of all direct expenses incurred in production. It is calculated as Cost of Raw Materials Consumed (

15,000 + 85,000 + 4,000 - 12,000 = 92,000

) plus Direct Factory Wages (

45,000

) plus Production Royalties (

8,000

), yielding

\text{₦}145,000

. Indirect costs like factory rent and depreciation are overheads and must be excluded.

Adım Adım Çözüm

Calculate the Cost of Raw Materials Consumed

₦92,000

Cost of raw materials consumed is found by adding carriage inwards to purchases of raw materials, adding opening stock, and deducting closing stock:

15,000 + 85,000 + 4,000 - 12,000 = 92,000

Identify all direct manufacturing cost components

Raw Materials Consumed (₦92,000), Direct Factory Wages (₦45,000), and Production Royalties (₦8,000)

Prime Cost consists strictly of direct costs (Direct Materials + Direct Labour + Direct Expenses).

Sum the direct costs to arrive at Prime Cost

₦145,000

Adding raw materials consumed, direct labor, and production royalties:

92,000 + 45,000 + 8,000 = 145,000

Anahtar Kavram

Prime Cost consists of the sum of direct materials consumed, direct wages/labour, and direct expenses (such as royalties). Indirect expenses like factory rent and plant depreciation belong to factory overheads.

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