Prime Cost Calculator
This small business tool is used to compute the prime cost incurred by the company during the given period.
How to calculate prime cost :
It is the direct cost of production incurred during a given period of time. Prime cost is also known as direct cost, flat cost or first cost
Prime Cost Formula :
The formula for the prime cost is simply expressed as a summation of raw material cost and direct labor cost incurred during the given period of time.
Prime Cost = Total Raw Materials Cost + Direct Labout Cost
For example, assume a business manufactures 10 chairs and incurs the following expenses:
$5000 for oak wood
$1500 for hardware
50 hours of labor for product assembly at a rate of $15 per hour
Only the costs of raw materials and direct labor are used in the prime cost formula.
The raw materials include the oak wood and hardware used for chair manufacturing:
The Total Cost of Raw Materials = $5000 + $1500 = $6500
The Total Cost of Labor (for Carpenter) = $15 × 50 Hours = $750
The Prime Cost of manufacturing 10 Chairs = $6500 + $750 = $7250
The Prime Cost of manufacturing 1 Chair = ($6500 + $750) / 10 = $7250/10 = $725