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WAEC Financial Accounting 2013 Question 41

Question 41

Manufacturing Accounts

Use the following information to answer questions 40 and 41.
Stock of raw materials 1/1/09: GH¢5,000
Stock of raw materials 31/12/09: GH¢5,500
Purchase of raw materials: GH¢50,000
Carriage inwards: GH¢3,000
Direct labour: GH¢12,000
Factory overhead: GH¢17,500
The prime cost is

  1. A.GH¢64,500.
  2. B.GH¢64,000.
  3. C.GH¢58,500.
  4. D.GH¢52,500.
Show the answer and explanation

Answer: A (GH¢64,500.)

Explanation

Prime cost = materials consumed + direct labour = 52,500 + 12,000 = GH¢64,500. Factory overhead is not part of prime cost.