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JAMB Principles of Accounts 1999 Question 25

Question 25

Manufacturing Accounts

Lawal and Co makes blocks and sells to builders. In computing prime cost, which of the following costs would be considered appropriate?

  1. A.Cement, sand and carriage outwards
  2. B.Water, carriage inwards and cement
  3. C.Sales boys' wages, cement and sand
  4. D.Carriage outwards, carriage inwards and cement.
Show the answer and explanation

Answer: B (Water, carriage inwards and cement)

Explanation

Prime cost is direct materials, labour and expenses. Water, cement and the carriage inwards on materials are direct; carriage outwards and sales wages are selling costs.