Question

ABC Company recorded the following information related to their
inventory accounts for 2020:

                    January 1, 2020        December 31, 2020
Direct materials         50,000                 36,000
Work in process          22,000                 41,000
Finished goods           38,000                 35,000

ABC Company's accounting records for 2020 indicated the following
costs had been incurred:

Direct materials purchased ................... $124,000
Depreciation, factory equipment ..............   40,000
Direct labor .................................   97,000
Utilities.....................................   20,000
Sales commissions.............................   56,000
Indirect materials............................   18,000
Depreciation, office equipment ...............   27,000
Production supervisor's salary ...............   67,000
Advertising...................................   61,000

60% of the utilities relate to the factory while 40% of the
utilities relate to the general office building.

Part A) Calculate ABC Company's prime costs for 2020.

Part B) Calculate the total period costs incurred during 2020.

Answer 1

Requirement A

Prime cost= $235,000

Working

Direct Material
Beginning raw material Inventory	$    50,000.00
Add: Raw material Purchases	$ 124,000.00
Raw material Available for use	$ 174,000.00
Less: Ending Raw material Inventory	$    36,000.00
Material Used in Production	$ 138,000.00
Add: Direct labor	$    97,000.00
Total Prime cost	235,000.00

Requirement B

Total period cost = $152,000

Working

Sales commission	$    56,000.00
Depreciation-Office equipment	$    27,000.00
Advertisement	$    61,000.00
Utilities-Office building	$      8,000.00
Total period cost	$ 152,000.00

All costs other than factory cost are period costs.