Prime Cost – NBC Institute

MI – Nov 2020 – L1 – SA – Q4 – Costing Techniques

Calculation of the prime cost of a job given the overheads and selling price.

Question

A company calculates the prices of jobs by adding overheads to prime cost and adding 30% to total costs as profit margin. A job was sold for N1,690,000 and incurred overheads of N694,000. The prime cost of the job is:

A. N489,000

B. N606,000

C. N996,000

D. N1,300,000

E. N1,400,000

Answer

Find Related Questions by Tags, levels, etc.

Tags: Job Costing, Overheads, Prime Cost, Profit Margins
Level: Level 1

Topic: Costing Techniques
Series: NOV 2020

FA – May 2014 – L1 – SA – Q13 – Control Accounts

This question tests knowledge of the components that make up prime cost in manufacturing.

Question

The cost of direct materials, direct wages and direct expenses are the components of ………………………..

Answer

Find Related Questions by Tags, levels, etc.

Tags: Direct Costs, Manufacturing Costs, Prime Cost
Level: Level 1

Topic: Control Accounts
Series: MAY 2014

MI – May 2021 – L1 – SA – Q1 – Cost Classifications

Identify the difference between prime cost and production cost.

Question

Which of the following best describes Prime Cost and Production Cost?

A. Prime cost is the same as production cost
B. Prime cost plus manufacturing indirect cost is production cost
C. Prime cost minus manufacturing overhead is production cost
D. Prime cost plus all direct costs is production cost
E. Prime cost plus fixed costs is production cost

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cost Classifications, Prime Cost, Production Cost
Level: Level 1

Topic: Cost Classifications
Series: MAY 2021

MA – Nov 2017 – L2 – Q3 – Activity-based costing

Calculate the prime cost, profit per unit using both absorption and activity-based costing, and comment on the differences and limitations.

Question

Bonti Ltd produces three different products using two production departments. The company currently uses Absorption Costing to establish product costs and profitability. The Directors have recently attended a conference on Activity Based Costing (ABC) and are examining whether ABC might provide a better system for Bonti Ltd.

The following budgeted information for the period ended 31 December 2017 has been collated for each of the three products:

Product	Taya	Maya	Paya
Production and Sales (units)	8,750	4,000	6,000
Unit sales price (GH¢)	56	106	84
Direct materials	1.5kg	6kg	7kg
Direct labour:
– Machine Department (hours per unit)	1 hour	8 hours	6 hours
– Assembly Department (hours per unit)	4 hours	3 hours	1 hour
Direct expenses (GH¢ per unit)	2	6	3
Machine Department (machine hours per unit)	2 hours	5 hours	4 hours

Raw material costs GH¢4 per kilo, and the hourly rate for all labour is GH¢5. The direct expenses relate entirely to specialized packaging, which is uniquely designed for each of the products and is therefore directly attributable to that product alone.

The current costing system absorbs overheads to the Machine and Assembly Departments on the basis of a recovery rate of GH¢3.50 per machine hour and GH¢1 per labour hour respectively.

The following is an analysis of the overheads by department:

Department	Overheads (GH¢)
Purchasing Department	22,400
Production Set-up & Design Dept	34,500
Customer Service Department	32,600
Machine Department	123,000
Assembly Department	26,500

The Departmental Managers have provided the following additional information about operations in their departments:

Activity	Taya	Maya	Paya	Total
Number of set-ups	10	10	30	50
Number of customer orders	80	86	160	326
Number of purchase orders	30	32	50	112

The Machine Department is capital intensive, and the Assembly Department is labour intensive.

Required:

a) Calculate the prime cost for each product.
b) Calculate the profit per unit for each product if overheads are absorbed on the Current Costing basis.
c) Calculate the profit per unit for each product if overheads are absorbed using an Activity Based Costing approach. Clearly identify any cost drivers you assign.
d) Comment on why there is a difference between the profit/loss shown on an Absorption Costing basis and that shown using Activity Based Costing.
e) Identify THREE limitations of Activity Based Costing.

Answer

Find Related Questions by Tags, levels, etc.

Tags: ABC Limitations, Cost Drivers, Overhead Allocation, Prime Cost, Profit Analysis
Level: Level 2

Topic: Activity-based costing
Series: NOV 2017

IMAC – April 2022 – L1 – Q3 – Cost Segregation and Estimation | Process Costing

Determination of prime and full costs of living room furniture and features of a process costing system.

Question

a) Frankadua Furniture Works located at Bomaa in the Ahafo Region has a rough estimate of the materials and labour cost of a set of living room furniture. It is expected that 8 cubic metres of timber, 6 cubic metres of foam and 12 square metres of fabric can be used. Glue, screws and other accessories will also cost GH¢80.

The Carpenters who will do the cutting, joining and finishing will use 35 hours. Since the company is fairly new, it will engage a tailor to sew the fabric to fit the sizes of the units of the chairs. For each set the tailor will charge GH¢150. Labour is paid at GH¢12 per hour plus a premium of GH¢5 per hour when the job requires more than 20 hours.

Timber is priced at GH¢25 per cubic metre, foam is GH¢20 per cubic metre while the fabric is GH¢15 per square metre. The Accountant has estimated overhead absorption rate of 20% on direct material cost.

Required:
i) Determine the prime cost of a set of living room furniture. (10 marks)
ii) Determine the full cost of a set of living room furniture. (5 marks)

b) Kempion Breweries Ltd has just commenced business in the alcoholic beverage sector of Ghana producing a local gin called Pitoo and is desirous of having a good grasp of its costs for product costing, valuation and pricing purposes.

Required:
State FOUR (4) features of a process costing system to be used by Kempion Breweries to arrive at the total cost of Pitoo. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Features of Process Costing, Full Cost, Prime Cost
Level: Level 1

Topic: Cost Segregation and Estimation, Process Costing
Series: APR 2022

MI – Nov 2020 – L1 – SA – Q4 – Costing Techniques

Calculation of the prime cost of a job given the overheads and selling price.

Question

A. N489,000

B. N606,000

C. N996,000

D. N1,300,000

E. N1,400,000

Answer

Find Related Questions by Tags, levels, etc.

Tags: Job Costing, Overheads, Prime Cost, Profit Margins
Level: Level 1

Topic: Costing Techniques
Series: NOV 2020

FA – May 2014 – L1 – SA – Q13 – Control Accounts

This question tests knowledge of the components that make up prime cost in manufacturing.

Question

The cost of direct materials, direct wages and direct expenses are the components of ………………………..

Answer

Find Related Questions by Tags, levels, etc.

Tags: Direct Costs, Manufacturing Costs, Prime Cost
Level: Level 1

Topic: Control Accounts
Series: MAY 2014

MI – May 2021 – L1 – SA – Q1 – Cost Classifications

Identify the difference between prime cost and production cost.

Question

Which of the following best describes Prime Cost and Production Cost?

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cost Classifications, Prime Cost, Production Cost
Level: Level 1

Topic: Cost Classifications
Series: MAY 2021

MA – Nov 2017 – L2 – Q3 – Activity-based costing

Calculate the prime cost, profit per unit using both absorption and activity-based costing, and comment on the differences and limitations.

Question

The following budgeted information for the period ended 31 December 2017 has been collated for each of the three products:

Product	Taya	Maya	Paya
Production and Sales (units)	8,750	4,000	6,000
Unit sales price (GH¢)	56	106	84
Direct materials	1.5kg	6kg	7kg
Direct labour:
– Machine Department (hours per unit)	1 hour	8 hours	6 hours
– Assembly Department (hours per unit)	4 hours	3 hours	1 hour
Direct expenses (GH¢ per unit)	2	6	3
Machine Department (machine hours per unit)	2 hours	5 hours	4 hours

The current costing system absorbs overheads to the Machine and Assembly Departments on the basis of a recovery rate of GH¢3.50 per machine hour and GH¢1 per labour hour respectively.

The following is an analysis of the overheads by department:

Department	Overheads (GH¢)
Purchasing Department	22,400
Production Set-up & Design Dept	34,500
Customer Service Department	32,600
Machine Department	123,000
Assembly Department	26,500

The Departmental Managers have provided the following additional information about operations in their departments:

Activity	Taya	Maya	Paya	Total
Number of set-ups	10	10	30	50
Number of customer orders	80	86	160	326
Number of purchase orders	30	32	50	112

The Machine Department is capital intensive, and the Assembly Department is labour intensive.

Required:

Answer

Find Related Questions by Tags, levels, etc.

Tags: ABC Limitations, Cost Drivers, Overhead Allocation, Prime Cost, Profit Analysis
Level: Level 2

Topic: Activity-based costing
Series: NOV 2017

IMAC – April 2022 – L1 – Q3 – Cost Segregation and Estimation | Process Costing

Determination of prime and full costs of living room furniture and features of a process costing system.

Question

Required:
i) Determine the prime cost of a set of living room furniture. (10 marks)
ii) Determine the full cost of a set of living room furniture. (5 marks)

Required:
State FOUR (4) features of a process costing system to be used by Kempion Breweries to arrive at the total cost of Pitoo. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Features of Process Costing, Full Cost, Prime Cost
Level: Level 1

Topic: Cost Segregation and Estimation, Process Costing
Series: APR 2022

Question Tag: Prime Cost

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

MI – Nov 2020 – L1 – SA – Q4 – Costing Techniques

Calculation of the prime cost of a job given the overheads and selling price.

FA – May 2014 – L1 – SA – Q13 – Control Accounts

This question tests knowledge of the components that make up prime cost in manufacturing.

MI – May 2021 – L1 – SA – Q1 – Cost Classifications

Identify the difference between prime cost and production cost.

MA – Nov 2017 – L2 – Q3 – Activity-based costing

Calculate the prime cost, profit per unit using both absorption and activity-based costing, and comment on the differences and limitations.

IMAC – April 2022 – L1 – Q3 – Cost Segregation and Estimation | Process Costing

Determination of prime and full costs of living room furniture and features of a process costing system.

MI – Nov 2020 – L1 – SA – Q4 – Costing Techniques

Calculation of the prime cost of a job given the overheads and selling price.

FA – May 2014 – L1 – SA – Q13 – Control Accounts

This question tests knowledge of the components that make up prime cost in manufacturing.

MI – May 2021 – L1 – SA – Q1 – Cost Classifications

Identify the difference between prime cost and production cost.

MA – Nov 2017 – L2 – Q3 – Activity-based costing

Calculate the prime cost, profit per unit using both absorption and activity-based costing, and comment on the differences and limitations.

IMAC – April 2022 – L1 – Q3 – Cost Segregation and Estimation | Process Costing

Determination of prime and full costs of living room furniture and features of a process costing system.

Our offerings

Contact Info

Customer

Get In Touch

Question Tag: Prime Cost

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

MI – Nov 2020 – L1 – SA – Q4 – Costing Techniques

Calculation of the prime cost of a job given the overheads and selling price.

You're reporting an error for "MI – Nov 2020 – L1 – SA – Q4 – Costing Techniques"

FA – May 2014 – L1 – SA – Q13 – Control Accounts

This question tests knowledge of the components that make up prime cost in manufacturing.

You're reporting an error for "FA – May 2014 – L1 – SA – Q13 – Control Accounts"

MI – May 2021 – L1 – SA – Q1 – Cost Classifications

Identify the difference between prime cost and production cost.

You're reporting an error for "MI – May 2021 – L1 – SA – Q1 – Cost Classifications"

MA – Nov 2017 – L2 – Q3 – Activity-based costing

Calculate the prime cost, profit per unit using both absorption and activity-based costing, and comment on the differences and limitations.

You're reporting an error for "MA – Nov 2017 – L2 – Q3 – Activity-based costing"

IMAC – April 2022 – L1 – Q3 – Cost Segregation and Estimation | Process Costing

Determination of prime and full costs of living room furniture and features of a process costing system.

You're reporting an error for "IMAC – April 2022 – L1 – Q3 – Cost Segregation and Estimation | Process Costing"

MI – Nov 2020 – L1 – SA – Q4 – Costing Techniques

Calculation of the prime cost of a job given the overheads and selling price.

You're reporting an error for "MI – Nov 2020 – L1 – SA – Q4 – Costing Techniques"

FA – May 2014 – L1 – SA – Q13 – Control Accounts

This question tests knowledge of the components that make up prime cost in manufacturing.

You're reporting an error for "FA – May 2014 – L1 – SA – Q13 – Control Accounts"

MI – May 2021 – L1 – SA – Q1 – Cost Classifications

Identify the difference between prime cost and production cost.

You're reporting an error for "MI – May 2021 – L1 – SA – Q1 – Cost Classifications"

MA – Nov 2017 – L2 – Q3 – Activity-based costing

Calculate the prime cost, profit per unit using both absorption and activity-based costing, and comment on the differences and limitations.

You're reporting an error for "MA – Nov 2017 – L2 – Q3 – Activity-based costing"

IMAC – April 2022 – L1 – Q3 – Cost Segregation and Estimation | Process Costing

Determination of prime and full costs of living room furniture and features of a process costing system.

You're reporting an error for "IMAC – April 2022 – L1 – Q3 – Cost Segregation and Estimation | Process Costing"

Our offerings

Contact Info

Customer

Get In Touch

admin