Question

Apple Company provides the following information: Cost of goods manufactured $500,000 Manufacturing overhead $20,000 Beginning work-in-process...

Apple Company provides the following information:
Cost of goods manufactured $500,000
Manufacturing overhead $20,000
Beginning work-in-process inventory $100,000
Ending work-in-process inventory $70,000
What are the prime costs for the year?
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Answer #1

The term "prime cost" refers to the direct costs of manufacturing an item. It is may be calculated by subtracting the "manufacturing overhead" from the "manufacturing costs incurred in the current accounting period"

Cost of goods manufactured

=

direct materials used + direct labor used + manufacturing overhead assigned

=

the manufacturing costs incurred in the current accounting period + beginning work-in-process inventory - ending work-in-process inventory.

The manufacturing costs incurred in the current accounting period = Ending work-in-process inventory - Beginning work-in-process inventory + Cost of goods manufactured

= $70,000 - $100,000 + $500,000

= $ 470,000

Prime Cost = The manufacturing costs incurred in the current accounting period - Manufacturing overhead

= $ 470,000 - $20,000

= $ 450,000

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