Question

Junel Co's manufacturing operations:

Inventories 03/01/2012 3/31/2012

Direct Materials 36,000 30,000

Work in Process 18,000 12,000

Finished goods 54,000 72,000

Additional information for the month of March 2012:

Direct materials purchased 84,000

Direct manufacturing labor payroll 60,000

Direct manufacturing labor rate per hour 7.5

Factory overhead rate per direct labor hour 10

For the month of March 2012 prime cost was?

a.) 144,000

b.)150,000

c.)120,000

d.) 90,000

Answer 1

Option B ($ 150,000) is the Correct Answer.

Notes

Statement of Prime Costs for Junel Co. For the month of March

Particulars	Amount	Amount
Direct Materials (Used in Production)
Beginning Inventory of Direct Materials 01/03/2012	36,000
Add: Purchases of Direct Materials during March	84,000
Direct Materials Available for Use	120,000
Less: Ending Inventory of Direct Materials 31/03/2012	(30,000)
Cost of Direct Materials Used in Production		90,000
Add: Direct Labour Cost		60,000
Prime Costs for the		150,000
Month of March

Formula of Prime Costs = Direct Materials Cost Used in Production + Direct Labour Cost