This is the total of direct labor used ($200,000) + purchases ($163,000). Prime costs are direct labor used and direct materials used , not direct materials purchased.
The prime costs are direct materials used and direct labor used. This is only the direct materials used and does not include direct labor used.
The prime costs are direct materials used and direct labor used. We are told that the direct labor was $200,000, but we will need to calculate the direct materials used for November. The beginning inventory of direct materials was $67,000. During the period, they purchased $163,000 of direct materials and also incurred $4,000 in transportation-in costs. However, they also returned $2,000 of direct materials during the period. Adding these together, we can calculate the total direct materials that they had available for use during November was $232,000 ($67,000 + $163,000 + $4,000 ? $2,000). Since there was an ending inventory of $62,000, they must have used $170,000 of direct materials during the period ($232,000 ? $62,000). Adding $170,000 of direct materials used to the $200,000 of direct labor used, the total prime costs were $370,000.
The prime costs are direct materials used and direct labor used. This answer is the amount of purchases adjusted for the change in inventory and does not include transportation-in, returns or direct labor. Furthermore, the amount of change in inventory is not included in the calculation of prime costs.
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Madtack uses one factory overhead control account and charges factory overhead to production at 70% of direct labor cost. The company does not formally recognize over/underapplied overhead until year-end. Madtack Company's prime cost for November is