Last year, Barnard Company incurred the following costs: direct materials, $50,000; direct labor, $20,000; manufacturing overhead, $130,000; selling expense, $40,000; administrative expense, $36,000.

Barnard produced and sold 10,000 units at a price of $31 each.

Refer to the information for Barnard Company above.

Prime cost per unit is:

a. $7.00

b. $20.00

c. $15.00

d. $5.00

e. $27.60

Prime cost per unit is: a. $7.00

Explanation:

Prime costs are direct costs and calculated by the following formula:

Prime costs = Direct materials + Direct labor

Prime cost per unit = Prime costs / number of units are produced

Barnard Company produced and sold 10,000 units. Direct materials were $50,000; Direct labor were $20,000.

Prime costs = $50,000 + $20,000 = $70,000

Prime cost per unit = $70,000/10,000 = $7.00