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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.
Unformatted text preview: Prime Cost The 2nd menu pricing method is Prime Cost. It is very similar to the Factor Method but direct labor cost is added to the raw item food cost. The Prime Cost method is a more accurate pricing method because different recipes can have the same ingredients, and thus the same raw item food cost, and yet require significantly different amounts of labor.