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7 December, 00:08

Rustic Living Furniture Company manufactures furniture at its central Kentucky factory. Some of its costs from the past year include:Wages paid to maintenance workers$60,000Fabric used to upholster furniture$8,000Wages paid to assembly-line workers$100,000Lumber used to build product$15,000Sales commissions$7,500Insurance costs for factory$21,000Freight-in (on raw materials) $3,000Utilities in factory$12,000Factory supervisor salary$60,000Depreciation on factory equipment$18,000Utilities in sales office$26,500Costs of delivery to customers$8,000Depreciation on sales office$1,000Lubricants used in factory equipment$500Prime costs for Rustic Living Furniture Company totaledA) $126,000. B) $23,000. C) $123,000. D) $168,500.

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  1. 7 December, 01:47
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    A) $126,000.

    Explanation:

    Prime costs include direct material and direct labor cost

    Direct material = Fabric used + Lumber used = $8,000 + $15,000 = $23,000

    Direct Labor = Wages to assembly line = $100,000

    Also Freight inwards shall be added to direct material = $3,000

    Total Prime Cost = $23,000 + $100,000 + $3,000

    Note: Wages to maintenance workers is not part of prime cost as is related to factory and not to manufacturing.

    All other cost provided are operating cost and will not be part of prime cost.

    A) $126,000.
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