If wages are paid of those workers which directly related with the manufacturing or units then wages are part of prime cost otherwise it is part of conversion cost.
yes it is part of the prime cost
Formula for prime cost is as follows: prime cost = direct material + direct labor So according to above mention formula yes it is prime cost because whitout labor no unit of product can be manufactured.
Only direct material and direct labor is part of prime cost while overheads are part of conversion cost so indirect labor is part of overheads so automatically part of conversion cost and not prime cost.
The one cost that would be classified as part of both prime cost and conversion cost would be:
Direct labor cost is part of prime cost as well as it is part of conversion cost as well.
yes it is part of the prime cost
Formula for prime cost is as follows: prime cost = direct material + direct labor So according to above mention formula yes it is prime cost because whitout labor no unit of product can be manufactured.
Only direct material and direct labor is part of prime cost while overheads are part of conversion cost so indirect labor is part of overheads so automatically part of conversion cost and not prime cost.
The one cost that would be classified as part of both prime cost and conversion cost would be:
The one cost that would be classified as part of both prime cost and conversion cost
Direct labor cost is part of prime cost as well as it is part of conversion cost as well.
Direct labor and direct materials are the components of prime cost so no other cost is part of prime cost and hence variable overheads also not included in prime cost.
Direct material and direct labor are the parts of prime cost while indirect labor is part of manufacturing overhead and manufacturing overhead is a part of conversion cost that's why indirect labor is not part of prime cost because it is that type of labor which is not directly identifiable with units production that;s why cannot charge directly to production units.
In services industries there is no raw material so only direct labor is part of prime cost in services industry.
that is the order of manufacturing account Direct materials + Direct wages + Direct expenses (like loyalty fees) = prime cost Production overheads = indirect wages, depreciation Non Production overheads = like Work in progress
wages are variable cost reason being is that wages are being used over and over again and does not remain constant.
conversion cost = direct wages + factory overheads (indirect material + indirect wages)