Concept:Prime cost is the total of direct materials consumed, direct labour and direct expenses. Production overheads are not included in prime cost.
Explanation:Direct materials used is calculated using the raw materials figures only.
Opening stock + Purchases + Carriage − Raw materials returned − Closing stock
=
24,750+129,640+10,000−12,200−45,000=107,190Carriage is added because it brings raw materials to the factory.
Raw materials returned are deducted because they reduce the materials available for use.
Closing stock is deducted because those materials were not used in production.
Direct labour = Wages of factory hands =
50,000Direct expenses = Royalties paid =
18,000Prime cost = Direct materials used + Direct labour + Direct expenses
=
107,190+50,000+18,000=175,190Factory supervisor’s salary and factory insurance are production overheads, so they are not added here.
Answer:The prime cost is ₦175,190; none of the given options matches.