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Prime Cost = Raw Materials + Direct Labor. The prime cost of a single bed frame is ($6,500 + $750) / 10, or $72.50. In order to generate a profit, the company must sell each frame for more than $72.50.
How to Calculate the Prime Cost. For example, the prime costs for creating a table would include raw materials such as the lumber, hardware and paint. For all of the materials, it would cost $200. In this example, it would take three hours to finish the product for sale, and would cost $50 per hour. To find the prime cost of the table, it would then look like this: $200 (Raw Material) + $150 (Direct Labor) = $350 (Prime Cost) Knowing that the prime cost is $350 means that the business cannot sell the table for under $350 unless they wish to incur a loss.