This accounting problem is solved step by step below, with detailed explanations to help you understand the method and arrive at the correct answer.
ScanSolve AI Answer
Step 1: Calculate the Cost of Raw Materials Consumed. Opening inventory of raw materials (1 July 2014) &= NS3,600 \\ Add: Purchases of raw materials &= NS16,500 \\ Add: Carriage inwards of raw materials &= NS480 \\ Less: Closing inventory of raw materials (30 June 2015) &= NS2,800 \\ Cost of raw materials consumed &= NS3,600 + NS16,500 + NS480 - NS2,800 \\ &= NS17,780 Step 2: Calculate Direct Labour Costs. Total labour costs are NS14,000. Only 75% was for direct labour. Direct Labour &= 75\% × NS14,000 \\ &= 0.75 × NS14,000 \\ &= NS10,500 Step 3: Identify Direct Expenses. Royalties are a direct expense. Royalties = NS2,300 Step 4: Calculate Prime Cost. Prime Cost