ACCA MA · Chapter 3 · Question 2 of 10
A company has the following costs for a period: Direct materials $12,000; Direct labour $8,000; Direct expenses $1,500; Production overheads $6,000; Administration overheads $3,000 What is the prime cost?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $21,500
Explanation
Prime cost is the total of all direct costs: 12,000 + 8,000 + 1,500 = $21,500. Adding production overheads would give production cost ($27,500), and adding administration overheads as well would give total cost ($30,500).
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