Given: N - Direct material N10,000,
Direct labour N5,000, Direct expenses N2,000, Factory overhead N4,000. What is the prime cost?
Direct labour N5,000, Direct expenses N2,000, Factory overhead N4,000. What is the prime cost?
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Correct Answer: Option B
Explanation:
To determine the Prime Cost, we add up all the direct costs only.
Given:
- Direct Material = ₦10,000
- Direct Labour = ₦5,000
- Direct Expenses = ₦2,000
- Factory Overhead = ₦4,000 → Not included in prime cost
Formula for Prime Cost:
\[
\text{Prime Cost} = \text{Direct Material} + \text{Direct Labour} + \text{Direct Expenses}
\]
\[
\text{Prime Cost} = 10,000 + 5,000 + 2,000 = ₦17,000
\]
Explanation: Prime cost includes only direct costs — it excludes all indirect or overhead costs like factory overhead.
To determine the Prime Cost, we add up all the direct costs only.
Given:
- Direct Material = ₦10,000
- Direct Labour = ₦5,000
- Direct Expenses = ₦2,000
- Factory Overhead = ₦4,000 → Not included in prime cost
Formula for Prime Cost:
\[
\text{Prime Cost} = \text{Direct Material} + \text{Direct Labour} + \text{Direct Expenses}
\]
\[
\text{Prime Cost} = 10,000 + 5,000 + 2,000 = ₦17,000
\]
Explanation: Prime cost includes only direct costs — it excludes all indirect or overhead costs like factory overhead.