Question

Rustic Living Furniture Company manufactures furniture at its central Kentucky factory. Some of its costs from the past year include:Wages paid to maintenance workers$60,000Fabric used to upholster furniture$8,000Wages paid to assembly-line workers$100,000Lumber used to build product$15,000Sales commissions$7,500Insurance costs for factory$21,000Freight-in (on raw materials)$3,000Utilities in factory$12,000Factory supervisor salary$60,000Depreciation on factory equipment$18,000Utilities in sales office$26,500Costs of delivery to customers$8,000Depreciation on sales office$1,000Lubricants used in factory equipment$500Prime costs for Rustic Living Furniture Company totaledA) $126,000.B) $23,000.C) $123,000.D) $168,500.

Answer 1

A) $126,000.

Step-by-step explanation:

Prime costs include direct material and direct labor cost

Direct material = Fabric used + Lumber used = $8,000 + $15,000 = $23,000

Direct Labor = Wages to assembly line = $100,000

Also Freight inwards shall be added to direct material = $3,000

Total Prime Cost = $23,000 +$100,000 + $3,000

Note: Wages to maintenance workers is not part of prime cost as is related to factory and not to manufacturing.

All other cost provided are operating cost and will not be part of prime cost.

A) $126,000.