ICAEW BIP · Chapter 1 · Question 2 of 10
Penrith Products incurred the following costs in a period: Direct materials £42,000 Direct labour £31,500 Direct expenses £6,300 Production overheads £18,900 What was the prime cost for the period?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) £79,800
Explanation
Prime cost is the total of all direct costs: direct materials + direct labour + direct expenses. £42,000 + £31,500 + £6,300 = £79,800. Production overheads are indirect costs and are added only when calculating total production cost (£98,700).
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