Craigmont company's direct materials costs are $4,000,000, its direct labor costs total $7,900,000, and its factory overhead costs total $5,900,000. its prime costs total is $11900000
Prime cost= Material cost + direct labor cost
= 4000000 + 7900000 = 11900000
This includes costs such as indirect materials, indirect labor, machine repairs, depreciation, factory supplies, insurance, and electricity. Manufacturing overhead is also known as factory overhead or manufacturing support costs.
Costs incurred outside the manufacturing process are not counted as factory overhead costs. For example, salaries paid to a company's president, manager, or human resources staff are considered administrative expenses, as is money spent on public relations and accounting.
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