ECONOMICS

Detailed explanation-1: -A prime cost is the total direct costs of production, including raw materials and labor. Indirect costs, such as utilities, manager salaries, and delivery costs, are not included in prime costs. The prime cost equation is equal to the cost of raw materials plus direct labor.

Detailed explanation-2: -To calculate Prime Cost, we have to take figures of raw material consumption and direct cost paid to the workers. In the above example, suppose the company pays 3200 towards direct labor cost out of entire direct expenditures; Formula = Raw Material + Direct Labour = 7500 + 3200 = 10700 Crore.

Detailed explanation-3: -Direct material: The cost of wood used to create the tables. Direct labor: The cost of wages and benefits for the carpenters to create the tables.

Detailed explanation-4: -Prime costs can be calculated using the following formula: Prime cost = direct materials cost + direct labor cost.

Detailed explanation-5: -Prime cost is the total of direct labor plus direct materials. Conversion cost is the sum of direct labor plus manufacturing overhead costs. These are the costs required to turn (convert) a raw material into a finished product.