If the direct material cost is $5500 and the prime cost is $25000, the direct manufacturing labor cost is ___________?
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Answer: A. $19,500
Explanation
Prime cost comprises both direct material costs and direct manufacturing labor costs combined. Subtracting direct material cost from total prime cost isolates direct manufacturing labor. Subtracting five thousand five hundred from twenty-five thousand yields nineteen thousand five hundred dollars. Prime costs represent the primary direct outlays required to fabricate a physical product. Direct materials form the foundational physical ingredients of the final manufactured goods. Direct labor expenses capture the compensation paid to assembly line production personnel.
Cost accounting systems separate labor and materials to analyze productivity and wage variances. Manufacturers track these direct cost components to ensure competitive pricing and profitability. Accurate labor tracking helps management evaluate workforce efficiency and operational performance. Option B incorrectly adds the material cost to prime cost instead of subtracting it. Option C suggests an excessively high labor expense that contradicts basic cost components. Option D represents a miscalculation that fails to reflect the correct mathematical difference.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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