Question
A company incurred direct material costs of Rs.100,000,
direct labour cost of Rs.68,000, variable overheads of Rs.24,000 and fixed overheads of Rs.1,50,000. What is the prime cost?Solution
Prime cost is the total of all direct costs including direct material, direct labour and direct expenses. Thus here, Prime cost = direct material + direct labour                                    = 1,00,000 + 68,000 = Rs.1,68,000
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