ExpertEasy2 marksShort Answer
ACCA · Question 03 · Syllabus A: Nature, source and purpose of management information
A non-governmental organization (NGO) providing clean water solutions incurs the following costs for a specific project:
- Direct materials (filters): $12,500
- Direct labor (engineers): $8,200
- Supervisor salary (apportioned): $3,000
- Direct expenses (specialized drilling equipment hire): $4,300
- General administrative overheads: $2,100
Calculate the Prime Cost of the project. (Enter number only, no commas or symbols)
A non-governmental organization (NGO) providing clean water solutions incurs the following costs for a specific project:
- Direct materials (filters): $12,500
- Direct labor (engineers): $8,200
- Supervisor salary (apportioned): $3,000
- Direct expenses (specialized drilling equipment hire): $4,300
- General administrative overheads: $2,100
Calculate the Prime Cost of the project. (Enter number only, no commas or symbols)
How to approach this question
Identify all direct costs (materials, labor, expenses) and sum them up. Ignore indirect costs (overheads, apportioned salaries).
Full Answer
Prime Cost = Direct Materials + Direct Labor + Direct Expenses.
Prime Cost = $12,500 + $8,200 + $4,300 = $25,000.
Supervisor salary and administrative overheads are indirect costs (overheads) and are excluded from prime cost.
Common mistakes
Including the supervisor salary or administrative overheads in the calculation.
Practice the full ACCA MA — Management Accounting Practice Exam 1
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