Staples - Johnstown 590 Galleria Dr, Johnstown PA 15904 Phone Number: (814) 262-9096
The distribution of manufacturing overhead costs to individual product unit, or production batches generally, requires a base or a cost driver, to which reference a rate, known as material burden rate applies. Material burden is the amount of manufacturing overhead costs that a unit of the base carries.
Only the costs of raw materials and direct labor are used in the prime cost formula. In the above example, the raw materials are the lumber and hardware used for assembly. The total cost of raw materials is $5,000 + $1,500, or $6,500. The total cost of labor is $15 * 50, or $750. Prime Cost = Raw Materials + Direct Labor.