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WAEC Financial Accounting 2012 Question 23

Question 23

Manufacturing Accounts

Which of the following is a component of prime cost?

  1. A.Depreciation
  2. B.Royalty
  3. C.Factory rent
  4. D.Factory electricity
Show the answer and explanation

Answer: B (Royalty)

Explanation

Prime cost = direct materials + direct labour + direct expenses. Royalty is paid per unit produced, so it is a direct expense. Factory rent, electricity and depreciation are factory overheads.