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Zorluk: KolayDirect Costs and Calculation of Prime Cost

The following cost items were extracted from the accounting records of Calabar Craftworks for the financial year ended 31 December 2025:

Cost ItemAmount (₦)
Direct materials consumed180,000180,000
Direct wages120,000120,000
Royalties on production15,00015,000
Factory power and lighting40,00040,000

What is the Prime Cost of the firm for the year?

Cevap: 315000 ₦

Cevap

The Prime Cost of Calabar Craftworks for the year is ₦315,000.
Prime Cost consists strictly of direct costs: direct materials consumed (₦180,000), direct wages (₦120,000), and direct expenses such as royalties (₦15,000). Adding these three components together gives ₦315,000. Factory power and lighting is an indirect expense and is therefore excluded.

Adım Adım Çözüm

1
Identify direct manufacturing costs
Direct materials consumed = ₦180,000, Direct wages = ₦120,000, Royalties on production = ₦15,000
Direct costs comprise direct raw materials, direct labour, and direct production expenses.
2
Exclude indirect costs
Factory power and lighting (₦40,000) is classified as factory overheads
Indirect factory expenses are excluded from the calculation of Prime Cost.
3
Calculate Prime Cost
Prime Cost = ₦180,000 + ₦120,000 + ₦15,000 = ₦315,000
Prime cost is the aggregate of all direct costs.

Anahtar Kavram

Prime Cost is the sum of all direct costs incurred in manufacturing, consisting of direct materials consumed, direct wages/labour, and direct expenses (such as royalties). Indirect factory costs are excluded.
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Direct Costs and Calculation of Prime Cost

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