TechCom Inc. manufactures laptops. Last month, direct materials (e.g., computer components) costing $600,000 were put into production. Direct labour of $900,000 was incurred, overhead equalled $500,000, and selling and administrative costs totalled $400,000. The company manufactured 10,000 laptops during the month. Assume the company had no beginning or ending work-in-process balances.
-Refer to the Figure.What was the total per-unit prime cost last month?
A)$62.50
B)$150.00
C)$162.50
D)$263.75

Question

Quizplus · Accepted Answer

Prime cost includes direct materials and direct labor. Therefore, the total prime cost is $600,000 (direct materials) + $900,000 (direct labor) = $1,500,000. To find the per-unit prime cost, divide the total prime cost by the number of units produced: $1,500,000 / 10,000 units = $150.00 per unit.