Determine the value of prime cost?

Total production cost- #360,000
Factory overhead cost- #56,000
Selling price per unit- # 120
Production volume of 4000 units

A. #416,000
B. #304,000
C. #240,000
D. #184,000

Correct Answer:

Option B – #304,000

Explanation

Prime cost is the direct cost of a commodity in terms of the materials and labour involved in its production, excluding fixed costs and overheads.

360,000 – 56,000 = 304,000