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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.
The difference is you multiply the factor times the raw item food cost plus the direct labor associated with producing that item Prime Cost Factor = 100/desired Prime Cost % Prime Cost Method = Prime Cost Factor * (Raw item food cost + direct labor cost) You can use the same short cut for the Prime Cost method that you can for the Factor Method.