This economics question tests your understanding of economic models and analysis. The step-by-step answer below applies the relevant framework and explains the reasoning.
ScanSolve AI Answer
To calculate the prime cost, we need to identify the direct materials used and direct labor costs. The formula for prime cost is: Prime Cost = Direct Materials Used + Direct Labor Step 1: Calculate Direct Materials Used. To find the direct materials used, we use the following formula: Direct Materials Used = Opening Raw Materials Inventory + Purchases of Raw Materials + Carriage Inwards on Raw Materials - Returns on Raw Materials - Closing Raw Materials Inventory From the provided information: Inventories on 1 October 2023: Raw materials = M15 000 Purchases of raw materials = M25 000 Carriage inwards: Raw materials = M1 800 Returns on raw materials = M3 800 Inventories on 30 September 2024: Raw materials = M12 000 Substitute the values into the formula: Direct Materials Used = M15\,000 + M25\,000 + M1\,800 - M3\,800 - M12\,000 Direct Materials Used = M40\,000 + M1\,800 - M3\,800 - M12\,000 Direct Materials Used = M41\,800 - M3\,800 - M12\,000 Direct Materials Used = M38\,000 - M12\,000 Direct Materials Used = M26\,000 Step 2: Identify Direct Labor. From the provided information, Manufacturing wages represent direct labor. Manufacturing wages = M9 200 Step 3: Calculate Prime Cost. Now, add the direct materials used and direct labor to find the prime cost: Prime Cost = Direct Materials Used + Direct Labor Prime Cost = M26\,000 + M9\,200 Prime Cost = M35\,200 The prime cost is M35\,200. That's 2 down. 3 left today — send the next one.