Direct Costs and Calculation of Prime Cost

14 soru

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 ( $\text{₦}$ ).

Cevabı ve açıklamayı göster

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.

Soru 2Soru →

WoodenCraft Nigeria Ltd produced custom office furniture during a financial period and compiled the following cost figures:

Cost Component	Amount (₦)
Raw timber consumed	450,000
Wages of workshop carpenters	280,000
Carriage inwards on raw timber	35,000
Direct hire of specialized carving machinery	45,000
Factory supervisor's salary	90,000
Factory power and electricity	60,000
Carriage outwards on finished furniture	25,000

What is the total Prime Cost for the production period?

₦730,000

₦810,000

₦835,000

₦960,000

Cevabı ve açıklamayı göster

Cevap: ₦810,000

Cevap

The Prime Cost is ₦810,000.

Prime Cost represents the sum of all direct production costs: Direct Materials Consumed (including carriage inwards on raw materials), Direct Wages/Labor, and Direct Expenses (such as royalties or direct hire of plant). Here,

\text{Prime Cost} = \text{₦}450,000 + \text{₦}35,000 + \text{₦}280,000 + \text{₦}45,000 = \text{₦}810,000

Adım Adım Çözüm

Identify all direct cost elements

Direct Materials = Raw timber (₦450,000) + Carriage inwards on timber (₦35,000) = ₦485,000; Direct Labour = Wages of carpenters (₦280,000); Direct Expenses = Direct hire of specialized machinery (₦45,000).

Prime Cost comprises all costs directly traceable to production: direct materials, direct labor, and direct expenses.

Calculate total Prime Cost

\text{Prime Cost} = \text{₦}485,000 + \text{₦}280,000 + \text{₦}45,000 = \text{₦}810,000

Adding these direct costs gives the complete Prime Cost prior to incorporating factory overheads.

Anahtar Kavram

Calculation of Prime Cost in Manufacturing Accounts

Tahmini Süre:1m 30s

Soru 3Soru →

The following extract of financial information was taken from the books of Kemi Manufacturing Enterprises for the financial year ended 31st December 2025:

Item	Amount (₦)
Opening inventory of raw materials	45,000
Purchases of raw materials	220,000
Carriage inwards on raw materials	15,000
Return outwards of raw materials	10,000
Direct manufacturing wages	130,000
Factory supervisor's salary	40,000
Royalties paid per production unit	25,000
Carriage outwards on finished goods	18,000
Depreciation of factory plant & machinery	22,000
Closing inventory of raw materials	50,000

Based on the figures provided, what is the total Prime Cost of production?

₦375,000

₦415,000

₦393,000

₦437,000

Cevabı ve açıklamayı göster

Cevap: ₦375,000

Cevap

The total Prime Cost of production is ₦375,000.

The correct figure of ₦375,000 is arrived at by determining the Cost of Raw Materials Consumed (Opening Stock ₦45,000 + Purchases ₦220,000 + Carriage Inwards ₦15,000 - Returns Outwards ₦10,000 - Closing Stock ₦50,000 = ₦220,000) and adding Direct Manufacturing Wages (₦130,000) and Direct Expenses/Royalties (₦25,000).

Adım Adım Çözüm

Calculate the Cost of Raw Materials Consumed

₦220,000

Cost of Raw Materials Consumed = Opening Inventory (₦45,000) + Purchases (₦220,000) + Carriage Inwards on Raw Materials (₦15,000) - Return Outwards of Raw Materials (₦10,000) - Closing Inventory (₦50,000) = ₦220,000.

Identify all direct production costs

Direct Wages = ₦130,000; Direct Expenses (Royalties) = ₦25,000

Royalties paid per unit produced are direct expenses; direct manufacturing wages are direct labor.

Sum up the components of Prime Cost

₦375,000

Prime Cost = Raw Materials Consumed (₦220,000) + Direct Wages (₦130,000) + Royalties (₦25,000) = ₦375,000.

Anahtar Kavram

Prime Cost represents the total sum of direct costs incurred in production: Direct Raw Materials Consumed + Direct Labor Wages + Direct Expenses (such as Royalties). Indirect costs (factory overheads) and administrative/distribution costs must be excluded.

Tahmini Süre:2m 0s

Soru 4Soru →

The following transactions and balance details were extracted from the books of Zenith Manufacturing Company for the year ended 31 December 2025:

Financial Item	Amount (₦)
Opening stock of raw materials	45,000
Purchases of raw materials	185,000
Carriage inwards on raw materials	12,500
Returns outwards of raw materials	8,000
Closing stock of raw materials	35,000
Direct manufacturing wages paid	95,000
Accrued direct manufacturing wages	15,000
Royalties paid on production	22,500
Factory rent and rates	40,000
Depreciation of factory machinery	18,000
Factory supervisor's salary	30,000

What is the total prime cost of the manufacturing entity for the year in Naira?

Cevabı ve açıklamayı göster

Cevap: 332000

Cevap

The total prime cost of the manufacturing entity for the year is ₦332,000.

Prime cost is calculated by summing direct materials consumed (₦199,500), direct labour adjusted for accruals (₦110,000), and direct expenses such as production royalties (₦22,500). Indirect items like factory rent, machinery depreciation, and supervisor salaries are factory overheads and are excluded from prime cost, giving a final answer of ₦332,000.

Adım Adım Çözüm

Calculate the cost of raw materials consumed during the production period

Raw Materials Consumed = ₦45,000 + ₦185,000 + ₦12,500 - ₦8,000 - ₦35,000 = ₦199,500

Carriage inwards is added to purchases to obtain the total cost of raw materials delivered, returns outwards are deducted, and closing stock is subtracted to determine materials actually used in production.

Adjust direct wages paid for accrued wages at the end of the financial period

Direct Labour = ₦95,000 + ₦15,000 = ₦110,000

Under the accrual concept of accounting, incurred costs belonging to the period must be added to payments made.

Identify direct expenses attributable directly to production

Direct Expenses = Royalties on production = ₦22,500

Royalties paid per unit produced are direct expenses because they vary directly with output.

Sum all direct cost components to find Prime Cost

Prime Cost = ₦199,500 + ₦110,000 + ₦22,500 = ₦332,000

Prime cost is the aggregate of direct materials consumed, direct labour, and direct expenses. Indirect factory costs such as factory rent (₦40,000), plant depreciation (₦18,000), and supervisor salary (₦30,000) are factory overheads and must be excluded.

Anahtar Kavram

Prime Cost Calculation in Manufacturing Accounts

Soru 5Soru →

The following details were extracted from the financial records of Apex Manufacturing Enterprise for the year ended 31st December 2025:

Financial Item	Amount (₦)
Inventory of Raw Materials (1st January 2025)	45,000
Purchases of Raw Materials	180,000
Carriage Inwards on Raw Materials	12,000
Returns Outward of Raw Materials	8,000
Inventory of Raw Materials (31st December 2025)	52,000
Direct Factory Wages Paid	95,000
Direct Wages Accrued (31st December 2025)	15,000
Direct Wages Prepaid (1st January 2025)	5,000
Royalties Paid on Production	25,000
Hire of Special Machine for Production	10,000
Factory Supervisor's Salary	40,000
Factory Rent and Rates	30,000
Depreciation of Factory Machinery	18,000
Carriage Outwards on Finished Goods	14,000

Calculate the Prime Cost for Apex Manufacturing Enterprise for the year ended 31st December 2025.

Cevabı ve açıklamayı göster

Cevap: 327000

Cevap

The Prime Cost for Apex Manufacturing Enterprise for the year ended 31st December 2025 is ₦327,000.

Prime Cost is the sum of all direct costs incurred in manufacturing: Direct Materials Consumed (₦177,000) + Direct Labour (₦115,000) + Direct Expenses (₦35,000) = ₦327,000. Indirect costs (factory supervisor's salary, factory rent, and machinery depreciation) are factory overheads and must be excluded, as well as carriage outwards which is a selling expense.

Adım Adım Çözüm

Calculate Direct Raw Materials Consumed

₦177,000

Opening Raw Materials (₦45,000) + Purchases (₦180,000) + Carriage Inwards (₦12,000) - Returns Outward (₦8,000) - Closing Raw Materials (₦52,000) = ₦177,000.

Calculate Total Direct Labour Cost

₦115,000

Direct Wages Paid (₦95,000) + Accrued Direct Wages at year-end (₦15,000) + Prepaid Direct Wages at start of year (₦5,000) = ₦115,000.

Calculate Total Direct Expenses

₦35,000

Royalties Paid on Production (₦25,000) + Hire of Special Machine for Production (₦10,000) = ₦35,000.

Identify and exclude indirect overheads and non-manufacturing expenses

Indirect factory items and selling expenses excluded

Factory supervisor's salary (₦40,000), factory rent and rates (₦30,000), and depreciation of factory machinery (₦18,000) are indirect manufacturing costs (factory overheads). Carriage outwards (₦14,000) is a selling expense.

Sum all direct cost components to arrive at Prime Cost

₦327,000

Prime Cost = Direct Materials Consumed (₦177,000) + Direct Labour (₦115,000) + Direct Expenses (₦35,000) = ₦327,000.

Anahtar Kavram

Direct Costs and Calculation of Prime Cost

Tahmini Süre:3m 0s

Soru 6Soru →

A manufacturing business reported a Prime Cost of $\text{₦}248,500$ for its operational year. The financial records contain the following summary of costs:

Cost Component	Amount (\text{₦})
Opening inventory of raw materials	28,000
Closing inventory of raw materials	32,000
Direct factory wages	95,000
Carriage inwards on raw materials	6,500
Factory supervisor salary	24,000
Production royalty	14,000
Depreciation of factory plant	18,000

What was the total cost of raw materials purchased during the year?

\text{₦}137,000

\text{₦}113,000

\text{₦}95,000

\text{₦}150,000

Cevabı ve açıklamayı göster

Cevap: \text{₦}137,000

Cevap

\text{₦}137,000

The value of \text{₦}137,000 is obtained by first subtracting direct labor (\text{₦}95,000) and production royalties (\text{₦}14,000) from Prime Cost (\text{₦}248,500), yielding raw materials consumed of \text{₦}139,500. Working backward through raw materials consumed (Opening Inventory + Purchases + Carriage Inwards - Closing Inventory) gives Purchases = \text{₦}139,500 - \text{₦}28,000 - \text{₦}6,500 + \text{₦}32,000 = \text{₦}137,000.

Adım Adım Çözüm

Identify direct costs and exclude factory overheads

Direct costs comprise Direct Raw Materials Consumed, Direct Wages (\text{₦}95,000), and Production Royalty (\text{₦}14,000). Factory supervisor salary (\text{₦}24,000) and plant depreciation (\text{₦}18,000) are indirect factory overheads and must be excluded.

Prime Cost includes only direct costs directly traceable to unit production.

Calculate Raw Materials Consumed from Prime Cost formula

\text{Prime Cost} = \text{Raw Materials Consumed} + \text{Direct Wages} + \text{Direct Expenses}

\text{₦}248,500 = \text{Raw Materials Consumed} + \text{₦}95,000 + \text{₦}14,000

\text{Raw Materials Consumed} = \text{₦}248,500 - \text{₦}109,000 = \text{₦}139,500

Rearranging the Prime Cost equation isolates the total cost of raw materials consumed.

Calculate Raw Material Purchases using the inventory equation

\text{Raw Materials Consumed} = \text{Opening Inventory} + \text{Purchases} + \text{Carriage Inwards} - \text{Closing Inventory}

\text{₦}139,500 = \text{₦}28,000 + \text{Purchases} + \text{₦}6,500 - \text{₦}32,000

\text{₦}139,500 = \text{Purchases} + \text{₦}2,500

\text{Purchases} = \text{₦}139,500 - \text{₦}2,500 = \text{₦}137,000

Carriage inwards increases raw material acquisition cost while inventory changes adjust for stock held across periods.

Anahtar Kavram

Prime cost is the sum of direct materials consumed, direct labor, and direct expenses. Factory overheads must be omitted from Prime Cost calculations.

Tahmini Süre:2m 0s

Soru 7Soru →

Kano Footwear Manufacturers compiled the following financial data for the month of March 2026:

Cost Element	Amount (₦)
Opening inventory of raw leather	90,000
Purchases of raw leather	620,000
Carriage inwards on raw leather	35,000
Closing inventory of raw leather	60,000
Direct factory labor wages	410,000
Royalties paid per shoe produced	55,000
Factory supervisor salary	120,000
Depreciation of production machinery	80,000

What is the Prime Cost for Kano Footwear Manufacturers for March 2026?

₦1,115,000

₦1,150,000

₦1,270,000

₦1,350,000

Cevabı ve açıklamayı göster

Cevap: ₦1,150,000

Cevap

The Prime Cost for March 2026 is ₦1,150,000.

Prime cost consists of all direct costs incurred in manufacturing, which are Direct Materials Consumed, Direct Labor, and Direct Expenses. Calculating Raw Materials Consumed: Opening Stock (₦90,000) + Purchases (₦620,000) + Carriage Inwards (₦35,000) - Closing Stock (₦60,000) = ₦685,000. Adding Direct Labor (₦410,000) and Royalties as direct expenses (₦55,000) yields ₦1,150,000. Factory supervisor salary and machinery depreciation are indirect factory overheads and are excluded.

Adım Adım Çözüm

Calculate Cost of Raw Materials Consumed

₦90,000 + ₦620,000 + ₦35,000 - ₦60,000 = ₦685,000

Opening inventory of raw materials plus purchases and carriage inwards minus closing inventory gives the net cost of raw materials used in production.

Identify Direct Labor and Direct Expenses

Direct Labor = ₦410,000; Direct Expenses (Royalties) = ₦55,000

Direct labor and royalties directly relate to the production units and form part of direct cost components.

Calculate Prime Cost

₦685,000 + ₦410,000 + ₦55,000 = ₦1,150,000

Prime Cost is the total sum of Direct Materials Consumed, Direct Labor, and Direct Expenses.

Anahtar Kavram

Calculation of Prime Cost and Classification of Direct Costs

Soru 8Soru →

The following operational financial records were extracted from the books of Kano Garment Manufacturing Enterprise for the accounting year ended 31 December 2025:

Cost Item	Amount (₦)
Inventory of raw materials (1 Jan 2025)	45,000
Purchases of raw materials	185,000
Carriage inwards on raw materials	12,000
Returns outwards of raw materials	8,000
Direct factory labour wages	115,000
Royalties paid on garment production	25,000
Factory supervisor's salary	40,000
Depreciation of factory machinery	18,000
Factory general insurance	22,000
Carriage outwards on finished garments	15,000
Inventory of raw materials (31 Dec 2025)	34,000

What is the Prime Cost for Kano Garment Manufacturing Enterprise for the year ended 31 December 2025?

₦332,000

₦340,000

₦355,000

₦420,000

Cevabı ve açıklamayı göster

Cevap: ₦340,000

Cevap

The Prime Cost of Kano Garment Manufacturing Enterprise for the year ended 31 December 2025 is ₦340,000.

Prime cost represents the total sum of all direct costs associated with production. It is calculated as: Prime Cost = Cost of Raw Materials Consumed + Direct Labour + Direct Expenses. Here, Cost of Raw Materials Consumed = Opening Stock (₦45,000) + Purchases (₦185,000) + Carriage Inwards (₦12,000) - Returns Outwards (₦8,000) - Closing Stock (₦34,000) = ₦200,000. Adding Direct Factory Labour (₦115,000) and Direct Royalties (₦25,000) gives a Prime Cost of ₦340,000.

Adım Adım Çözüm

Calculate Cost of Raw Materials Consumed

₦200,000

Formula: Opening Inventory of Raw Materials (₦45,000) + Purchases (₦185,000) + Carriage Inwards (₦12,000) - Returns Outwards (₦8,000) - Closing Inventory of Raw Materials (₦34,000) = ₦200,000.

Identify Direct Labour and Direct Expenses

Direct Labour = ₦115,000; Direct Expenses (Royalties) = ₦25,000

Direct labour wages and production royalties are directly traceable to individual units of production.

Compute Total Prime Cost

₦340,000

Prime Cost = Raw Materials Consumed (₦200,000) + Direct Labour Wages (₦115,000) + Royalties (₦25,000) = ₦340,000.

Anahtar Kavram

Calculation of Prime Cost in a Manufacturing Account

Tahmini Süre:2m 0s

Soru 9Soru →

The following cost details were extracted from the financial records of Kaduna Industrial Fabrics Ltd for the accounting year ended 31 December 2025:

Cost Item	Amount (₦)
Opening inventory of raw materials	85,000
Purchases of raw materials	420,000
Carriage inwards on raw materials	18,000
Returns of raw materials to suppliers	15,000
Closing inventory of raw materials	92,000
Direct factory wages	310,000
Royalty paid on production design	45,000
Factory supervisor's salary	60,000
Factory building rent	70,000
Depreciation of factory machinery	25,000

What is the Prime Cost of production for the year?

Cevabı ve açıklamayı göster

Cevap: 771000

Cevap

The Prime Cost of production for the year is ₦771,000.

Prime Cost consists strictly of direct material costs, direct labour costs, and direct expenses. The raw materials consumed calculate as ₦85,000 + ₦420,000 + ₦18,000 - ₦15,000 - ₦92,000 = ₦416,000. Adding direct wages of ₦310,000 and direct royalty expenses of ₦45,000 gives ₦771,000. Factory overheads such as supervisor's salary, factory rent, and plant depreciation are indirect costs and must be excluded.

Adım Adım Çözüm

Calculate the total cost of raw materials consumed

₦416,000

Raw materials consumed equals Opening Inventory of Raw Materials (₦85,000) + Purchases (₦420,000) + Carriage Inwards (₦18,000) - Returns Outward (₦15,000) - Closing Inventory (₦92,000).

Identify direct wages and direct expenses

Direct wages = ₦310,000; Direct expenses (Royalty) = ₦45,000

Direct factory wages represent direct labour costs, while royalties paid specifically for production designs are direct manufacturing expenses.

Sum all direct cost elements to determine Prime Cost

₦771,000

Prime Cost is the sum of Direct Raw Materials Consumed (₦416,000) + Direct Labour (₦310,000) + Direct Expenses (₦45,000).

Anahtar Kavram

Calculation of Prime Cost from Direct Costs

Soru 10Soru →

Lekki Craftwork Industries extracted the following financial data from its operational books for the accounting year ended 31 December 2025:

Account Details	Amount (₦)
Opening inventory of raw materials	45,000
Purchases of raw materials	180,000
Returns outward of raw materials	15,000
Carriage inwards on raw materials	12,000
Closing inventory of raw materials	32,000
Direct wages paid	110,000
Direct wages accrued at year-end	10,000
Hire of special production equipment	25,000
Royalties paid on technical designs	18,000
Carriage outwards	8,000
Factory supervisor's salary	35,000
Depreciation of factory machinery	20,000

What is the prime cost for the year?

₦408,000

₦351,000

₦353,000

₦388,000

Cevabı ve açıklamayı göster

Cevap: ₦353,000

Cevap

The prime cost for the year is ₦353,000.

Prime cost is determined by combining all direct manufacturing costs:
1. Raw Materials Consumed:

₦45,000 + ₦180,000 - ₦15,000 + ₦12,000 - ₦32,000 = ₦190,000

2. Direct Labour:

₦110,000 + ₦10,000 = ₦120,000

3. Direct Expenses:

₦25,000 + ₦18,000 = ₦43,000

\text{Prime Cost} = ₦190,000 + ₦120,000 + ₦43,000 = ₦353,000

Factory supervisor salary and depreciation are factory overheads, while carriage outwards is an operational selling expense.

Adım Adım Çözüm

Calculate the cost of raw materials consumed

₦190,000

Cost of Raw Materials Consumed = Opening Inventory (₦45,000) + Purchases (₦180,000) - Returns Outward (₦15,000) + Carriage Inwards (₦12,000) - Closing Inventory (₦32,000) = ₦190,000.

Adjust direct wages for year-end accruals

₦120,000

Total Direct Labour = Direct Wages Paid (₦110,000) + Accrued Direct Wages (₦10,000) = ₦120,000.

Sum all direct production expenses

₦43,000

Direct Expenses = Hire of Special Equipment (₦25,000) + Royalties Paid (₦18,000) = ₦43,000.

Compute Prime Cost by summing direct materials, direct labour, and direct expenses

₦353,000

Prime Cost = Raw Materials Consumed (₦190,000) + Direct Labour (₦120,000) + Direct Expenses (₦43,000) = ₦353,000.

Anahtar Kavram

Prime cost is the sum of all direct costs of production: direct materials consumed, direct labor, and direct expenses. Indirect costs (factory overheads) and distribution expenses (carriage outwards) are strictly excluded.

Soru 11Soru →

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

Cost Item	Amount (₦)
Direct materials consumed	$180,000$
Direct wages	$120,000$
Royalties on production	$15,000$
Factory power and lighting	$40,000$

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

Cevabı ve açıklamayı göster

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

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.

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.

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.

Soru 12Soru →

The following financial details were extracted from the accounting records of Ibadan Furniture Craft Enterprise for the accounting year ended 31 December 2025:

Accounting Item	Amount (₦)
Inventory of raw materials (1 January 2025)	$120,000$
Inventory of raw materials (31 December 2025)	$95,000$
Purchases of raw materials	$480,000$
Carriage inwards on raw materials	$25,000$
Direct wages paid to factory workers	$310,000$
Royalties paid on production volume	$45,000$
Factory supervisor's salary	$150,000$
Depreciation of factory machinery	$60,000$
Factory power and lighting	$85,000$

What is the Prime Cost of production for the period in Naira (₦)?

Cevabı ve açıklamayı göster

Cevap: 885000

Cevap

The Prime Cost of production for Ibadan Furniture Craft Enterprise for the period ended 31 December 2025 is ₦885,000.

Prime Cost comprises all direct costs involved in production: Direct Raw Materials Consumed + Direct Labor (Wages) + Direct Expenses (Royalties). Calculating raw materials consumed yields ₦120,000 + ₦480,000 + ₦25,000 - ₦95,000 = ₦530,000. Adding direct wages of ₦310,000 and direct expenses (royalties) of ₦45,000 gives ₦885,000. Indirect expenses like supervisor salary, factory power, and machinery depreciation are excluded as they represent factory overheads.

Adım Adım Çözüm

Calculate the Cost of Raw Materials Consumed

₦530,000

Cost of Raw Materials Consumed = Opening Stock of Raw Materials (₦120,000) + Purchases of Raw Materials (₦480,000) + Carriage Inwards on Raw Materials (₦25,000) - Closing Stock of Raw Materials (₦95,000).

Sum all direct cost components to calculate Prime Cost

₦885,000

Prime Cost is the sum of Cost of Raw Materials Consumed (₦530,000), Direct Wages (₦310,000), and Direct Expenses such as Royalties (₦45,000).

Anahtar Kavram

Prime Cost consists strictly of direct material costs consumed, direct wages/labor, and direct production expenses.

Soru 13Soru →

The following extract was taken from the manufacturing records of Enugu Textile Mills Ltd for the operational year ended 31 December 2025:

Item	Amount (₦)
Opening stock of raw materials	150,000
Closing stock of raw materials	90,000
Purchases of raw materials	420,000
Carriage inwards on raw materials	30,000
Direct factory wages	280,000
Production royalties paid	45,000
Factory supervisor salary	65,000
Factory rent and rates	80,000
Depreciation of factory plant	40,000

What is the prime cost of production for Enugu Textile Mills Ltd for the year?

₦805,000

₦835,000

₦900,000

₦1,020,000

Cevabı ve açıklamayı göster

Cevap: ₦835,000

Cevap

The prime cost of production is ₦835,000.

Prime cost is the total of all direct production costs. First, calculate the cost of raw materials consumed: Opening Stock (₦150,000) + Purchases (₦420,000) + Carriage Inwards (₦30,000) - Closing Stock (₦90,000) = ₦510,000. Next, add all other direct costs, which are Direct Factory Wages (₦280,000) and Production Royalties (₦45,000). ₦510,000 + ₦280,000 + ₦45,000 gives ₦835,000. Indirect costs such as factory supervisor salary, factory rent, and plant depreciation are factory overheads and are excluded from prime cost.

Adım Adım Çözüm

Calculate the Cost of Raw Materials Consumed

Raw Materials Consumed = Opening Stock + Purchases + Carriage Inwards - Closing Stock = ₦150,000 + ��420,000 + ₦30,000 - ₦90,000 = ₦510,000

Carriage inwards is a direct expenses added to purchases, while closing stock must be deducted to find the cost of materials actually used in production.

Identify other direct cost components

Direct Factory Wages = ₦280,000; Production Royalties = ��45,000

Royalties tied directly to production units and direct factory labor are direct costs, whereas supervisor salary, factory rent, and plant depreciation are indirect factory overheads.

Compute Prime Cost

Prime Cost = Raw Materials Consumed + Direct Wages + Direct Expenses = ₦510,000 + ₦280,000 + ₦45,000 = ₦835,000

Prime cost is defined as the aggregate total of all direct production costs.

Anahtar Kavram

Prime cost comprises all direct costs of production: direct raw materials consumed, direct wages/labor, and direct expenses (such as royalties or carriage inwards on raw materials). Factory overheads are excluded.

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The following operational details were extracted from the accounts of Zaria Leathercrafts Enterprise for the financial year:

Operational Item	Amount (₦)
Opening inventory of raw materials	50,000
Purchases of raw materials	240,000
Carriage inwards on raw materials	18,000
Closing inventory of raw materials	38,000
Direct factory wages	160,000
Royalties paid on production	30,000
Factory supervisor salary	75,000
Depreciation of factory machinery	40,000

What is the prime cost of production for the period?

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Cevap: 460000

Cevap

The prime cost of production for the period is ₦460,000.

Prime Cost is the sum of all direct manufacturing costs. It is calculated by adding the cost of raw materials consumed (₦50,000 + ₦240,000 + ₦18,000 - ₦38,000 = ₦270,000), direct factory wages (₦160,000), and direct expenses such as royalties (₦30,000), giving a total of ₦460,000. Indirect expenses like factory supervisor salary and depreciation of machinery are factory overheads and are excluded.

Adım Adım Çözüm

Calculate the cost of raw materials consumed

₦270,000

Raw materials consumed is computed as opening stock of raw materials (₦50,000) plus purchases (₦240,000) plus carriage inwards on raw materials (₦18,000) minus closing stock of raw materials (₦38,000).

Identify direct cost components

Direct wages = ₦160,000; Direct expenses (royalties) = ₦30,000

Direct costs are expenses directly traceable to the physical unit produced. Royalties and direct wages are direct costs, while supervisor salaries and machinery depreciation are indirect factory overheads.

Sum direct materials, direct wages, and direct expenses

₦460,000

Prime Cost = Raw Materials Consumed + Direct Wages + Direct Expenses = ₦270,000 + ₦160,000 + ₦30,000 = ₦460,000.

Anahtar Kavram

Prime Cost Calculation in Manufacturing Accounts

Direct Costs and Calculation of Prime Cost

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