Q:

What is the prime cost formula?

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Quick Answer

The formula for prime cost is the sum of the direct cost of materials, the direct cost of labor and the direct cost of expenses, according to BusinessDictionary.com. The prime cost is the cost of a particular product that the manufacturer incurs apart from any business overhead expenses.

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What is the prime cost formula?
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Full Answer

The prime cost does not include the price, running expenses and upkeep of the physical building, nor does it include salaries of all personnel in the business. The prime cost varies directly with the amount of the product produced. It is typically lower per item in mass-produced items and higher in items produced in limited numbers.


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    Prime cost is the total production inputs needed to create a given output. More generally, prime cost is the total amount of material and labor necessary to create a product. Businesses use prime cost to determine the price of a product and to increase profit margins.

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