Question

Inventory balances for Balmer Company in April 2018 are as follows:

a) April 1, 2018 April 30, 2018
b) Raw materials $40,000 $35,000
c) Work in process $67,500 $59,800
d) Finished goods $150,000 $120,000
During April, purchases of direct materials were $58,000. Direct labor and factory overhead costs were $82,000 and $110,000, respectively.
Prime costs for April were:
a) $145,000
b) $140,000
c) 88,000
d) 152,700

Answer 1

The prime costs for Balmer Company in April 2018 are calculated by adding the cost of direct materials used and the direct labor costs. After calculating, we find that the prime costs amount to $145,000. Option A is correct.

Step-by-step explanation:

The question asks to calculate the prime costs for Balmer Company in April 2018. Prime costs consist of the sum of direct materials used and direct labor. Within the given period, we know that the purchases of direct materials were $58,000 and direct labor costs were $82,000. To calculate the cost of direct materials used, we subtract the ending inventory of raw materials from the sum of the beginning inventory and the purchases:

• Beginning inventory of raw materials: $40,000
• Purchases of direct materials: $58,000
• Ending inventory of raw materials: $35,000

Cost of direct materials used = $40,000 + $58,000 - $35,000 = $63,000. We then add this to the direct labor costs to calculate prime costs:

Prime costs = $63,000 + $82,000 = $145,000.

Therefore, the correct answer for the prime costs for April is $145,000 (option a).