• 1 Marks

MI – Nov 2020 – L1 – SA – Q4 – Costing Techniques

Calculation of the prime cost of a job given the overheads and selling price.

A company calculates the prices of jobs by adding overheads to prime cost and adding 30% to total costs as profit margin. A job was sold for N1,690,000 and incurred overheads of N694,000. The prime cost of the job is:

A. N489,000

B. N606,000

C. N996,000

D. N1,300,000

E. N1,400,000

B. N606,000

Explanation: The correct answer is B because the prime cost can be calculated by working backward from the selling price. First, we know that 30% of the total cost is the profit margin

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