Compute the prime cost from the table below?

A. N6,500
B. N 8,500
C. N6,000
D. N7,500

Correct Answer:

Option B – N 8,500

Explanation

Prime cost is the direct cost of a commodity in terms of the materials and labour involved in its production, excluding fixed costs. from the table above, prime cos is derived thus; Prime cost = direct material + direct labour + direct expenses

2,500+5,000+1,000=8,500