Question

The following transactions relate to the AKHTER CORP. for the month of November 2015:

	Product - A	Product – B
Production	10,000 units	8,000 units
Beginning Inventory	1,000 units	900 units
Ending Inventory	2,000 units	100 units

 Unit Cost applicable to inventories and Production

Direct Material	Rs. 4 per unit	Rs.  3 per unit
Direct Labour	Rs. 10 per unit	Rs. 20 per unit
Factory Overhead	Rs. 7 per unit	Rs. 14 per unit

Actual FOH was Rs. 182,400, under or over applied factory overhead is to be adjusted in Cost of Goods Sold.

 

Calculate Prime Cost.

Answer 1

Particulars	Product A	Product B
Direct material cost	10000*4 = $40,000	8000*3 = $24,000
Direct labour cost	10000*10 = $100,000	8000*20 = $160,000
Prime cost	$140,000	$184,000

Prime costs of Product A is $140,000 and Prime costs of Product B is $184,000. 

Prime costs = Direct material cost + Direct labour cost