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Prime cost refers to a manufactured product's costs, which are calculated to ensure the best profit margin for a company. The prime cost calculates the use of raw materials inventoriable costx direct labor, but does not factor in indirect manufacturing expenses such as the cost for a company logo or gas used to deliver inventoriable costx product. BREAKING DOWN 'Prime Cost'. Prime cost is the direct cost of manufacturing an item for sale. Businesses use prime cost as a way of measuring the total cost of the production inputs needed to create a given output. By analyzing inventoriable costx prime costs, a company can determine how much it must charge for its finished product in order to make a profit. For example, the prime costs for creating a table would include raw materials such as the lumber, hardware and inventoriable costx. When calculating the prime cost, a company does not factor in indirect costs, such as advertising costs, manager salaries, or delivery costs. While it is good for a business to know its indirect costs for budgeting purposes, it is not essential to individual product inventoriable costx. Businesses need to calculate the prime cost of each product manufactured to ensure they are turning a profit. Individuals who work for themselves, such as artisans who sell custom-made furniture, must use the prime cost to ensure they are making the hourly wage they desire while also profiting on each product made. Term Of The Day A savings certificate entitling the bearer to receive interest. A CD bears a maturity Investors: John Bogle has some advice for you. Bringing Impact Tools to Advisors. Financial Advisors Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education.



Capitalized Costs - expenses
Capitalized Costs - expenses
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