The following balances was exgtracted from the books of Oluwalambe Ltd, manufacturer, on 31st December 2007
| Stock of raw materials 1 – 1 – 2007 | 8000 |
|
Purchase of raw materials |
450000 |
|
Stock of raw materials 31 – 12 – 2007 |
95000 |
|
Direct wages |
65000 |
|
Indirect wages |
28000 |
|
Depreciation on plants |
32000 |
|
Factory rent |
3500 |
|
Work in progress 1- 1- 2007 |
32500 |
|
Work in progress 31 – 12- 2007 |
37500 |
The prime cost is
-
#500,000
- #527,500
- #530,000
- #463,000
The correct answer is: A
Explanation
Prime Cost = Direct Materials Cost + Direct Labor Cost
Direct Materials Cost (Cost of Raw Materials Consumed): We have already calculated this in the previous question and found it to be #435,000
Prime Cost = #435,000 (Direct Materials) + #65,000 (Direct Labor)
Prime Cost = #500,000