Q:

# What is the prime cost formula?

A:

The formula for prime cost is the sum of the direct cost of materials, the direct cost of labor and the direct cost of expenses, according to BusinessDictionary.com. The prime cost is the cost of a particular product that the manufacturer incurs apart from any business overhead expenses.

## Keep Learning

Credit: Alija Vetta Getty Images

The prime cost does not include the price, running expenses and upkeep of the physical building, nor does it include salaries of all personnel in the business. The prime cost varies directly with the amount of the product produced. It is typically lower per item in mass-produced items and higher in items produced in limited numbers.

Sources:

## Related Questions

• A:

Companies define the cost of labor as the sum of all wages paid to employees plus the cost of employee benefits and any payroll taxes paid by a company. The cost of labor for companies is broken into two separate types of costs, direct and indirect.

Filed Under:
• A:

The formula for calculating cost of sales is adding the starting inventory, inventory purchases and overhead expenses together and subtracting that number from inventory at the end of the year, according to Chron. This formula subtracts the sales cost from the amount earned through sales to determine the company's income.

Filed Under:
• A:

Calculating the cost of shocks and struts replacements follows the same formula as calculating the cost of any service: materials + labor. In the case of shocks and struts the materials cost is the price of the parts, and labor is the amount a mechanic charges for his work.