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Prime Costs
Prime Costs
Indirect costs, such as utilities, manager salaries, and delivery costs, are not included in prime costs.
Prime Costs
23. Wheel and Tire Manufacturing currently produces 1,000 tires per month. The following per unit data apply for sales to regular customers:
The plant has capacity for 3,000 tires and is considering expanding production to 2,000 tires. What is the total cost of producing 2,000 tires?
a. P39,000
b. P78,000
c. P68,000
d. P62,000
*Solution:
DM (P20 x 2,000 units) + DL (P3 x 2,000 units) + VOH (P6 x 2,000 units) + FOH (P10 x 1,000 units) = P40,000 + P6,000 + P12,000 + P10,000 = P68,000
38. A hotel has recorded that the costs incurred were P570 when 340 guests stayed for one night. They know that the fixed laundry cost is P400 per night. What
is the variable laundry cost per guest-night (to the nearest cent)?
a. P 0.50
b. P 1.18
c. P 1.68
d. None of the above
*Solution:
340b = -P170
340 340
b = P0.50