Question

The beginning balance in the raw materials inventory account was $25,000. During the month, the company made raw materials purchases amounting to $54,000. At the end of the month, the balance in the raw materials inventory account was $37,000. Direct labor cost was $25,000 and manufacturing overhead cost was $62,000. The beginning balance in the work in process account was $22,000 and the ending balance was $23,000. The beginning balance in the finished goods account was $44,000 and the ending balance was $50,000. Selling expense was $21,000 and administrative expense was $38,000. The prime cost for November was:

Answer 1

$67,000

Explanation:

The computation of prime cost is shown below:-

Total conversion cost = Direct labor + Manufacturing overhead

= $25,000 + $62,000

= $87,000

Total prime cost = Beginning raw material + Raw material purchased - Ending raw material + Direct labor

= $25,000 + $54,000 - $37,000 + $25,000

= $67,000

hence, the prime cost is $67,000