Detailed notes on Prime Cost

Prime Cost comprises a sum of Direct Material, Direct Wages or Labour and Direct Expenses
Let us understand each:
DIRECT MATERIAL
Materisl that can be conveniently identified with ad can e directly allocated to a particular job or process to calculate cost of one unit of product
Some examples are:
Timber in furniture
Cloth in Garments
Milk and Cream in Ice Cream
Can for food and drink
Bottle for different types of liquid products

LABOUR
It is a human resource and cannot be acquired. It only can be hired and yet participates in the production process
Direct Labour is the labour which can be readily identified with a specific job, contract or work order. It includes
- all labour directly engaged in converting raw material or WIP into finished products or in altering the construction, composition or condition of the product
- any other form of labour which is incurred  wholly or specifically for any particular job, process or work order
Examples
Weaver in weaving unit
Carpenter in Furniture unit
Baker in bakery
Halwai in Sweet shop
Wages paid to direct labour are termed as direct labour cost and form part of Prime Cost


DIRECT  EXPENSES
All expenses other than Direct Material Cost and Direct Labour Expenses are Direct Expenses

INDIRECT MATERIAL
Those material that cannot be conveniently identified with and cannot  be directly allocated  to a particular product, job or process
Examples
Lubricating oil or grease for machine
Boiler of machinery
Nails used in making furniture
Cost Of Consumables
Cost of printing. Postage used in Production

INDIRECT LABOUR
Labour that cannot be readily identified with a particular job, contract or work order
Examples
Labour Employed in Personnel Deptt, Rand D, IT, Time Keeping or Pay Roll
Salary of supervisor , factory manager and other superintendents and supervisors
Contribution of Employees State Insurance (ESI)


INDIRECT EXPENSES
All indirect costs other than indirect material and indirect labour  and indirect expenses

Examples
Rent, Rates and Taxes of Building
Repairs Insurance and Depreciation of Plant, Land and Building
Telephone Expenses
Lighting , Heating and Cleaning Expenses

Comments

Post a Comment

Popular posts from this blog

Work certified and uncertified

Meaning of Work Certified  When contractor takes the contract to complete any construction work, it may complete in 4 or 5 years. but contractor has to pay different expenses for material, labor and others. So, it is very necessary to pay him some money of contract. This money is given on the basis of work done. So, any part of construction which is completed by contractor will be work certified if it is certified by an authority. Authority may be independent engineer or architect who can estimated the work. He will issue the certificate of work done after certifying the work of construction. On this work certified, contractor has right to get money of contract. Meaning of Work Uncertified Work uncertified means work done but not certified by authority. So, contractee will cut some money on the basis of work uncertified and will keep in his pocket. This will be retention money. Accounting Treatment of Work Certified and Work Uncertified  (I) Work  certified and work unce
Read more

Sale of Goods Act- Conditions and Warranties

Image
The Sale of Goods Act, identifies the terms, ‘Conditions’ and ‘Warranties’ as being of a prime significance in a contract of sale. Both the terms imply a promise that is made by the seller. However, the difference between Conditions and Warranties arises due to the nature of the promise that is made in each case. In the case of ‘Condition’ the impact is on the very essence of the contract; whereas, in the case of ‘Warranty’, the promise is in the nature of a collateral to the main purpose of the contract. It is thus evident that if there is a breach of either, a condition or a warranty, the effects will be different. Illustration 1:   Sita bought a wet grinder from an electric shop. The purpose for which the grinder was to be used was known to the seller. The grinder was unfit for the purpose. In this case there is a breach of an express condition by the electric shop and Sita is entitled to return the grinder and be refunded the money paid. Illustration 2:   Varuna bought a
Read more

E Commerce Security environment

THE ECOMMERCE SECURITY ENVIRONMENT What is eCommerce Security? eCommerce security refers to the principles which guide safe electronic transactions, allowing the buying and selling of goods and services through the Internet, but with protocols in place to provide safety for those involved. Successful business online depends on the customers’ trust that a company has eCommerce security basics in place. Privacy One of the most obvious eCommerce security basics is privacy, which in this situation means not sharing information with unauthorized parties. When you shop online, your personal details or account information should not be accessible to anyone except the seller you have chosen to share it with. Any disclosure of that information by the merchant would be a breach of confidentiality. The business is responsible to provide at least the minimum in encryption, virus protection, and a firewall so that bank details and credit card information remain private. Integrity A s
Read more