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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.
Taken as a whole, prime cost is typically at a maximum of two-thirds of sales (for example, a food cost percentage of 32% and a labor cost percentage of 34%), leaving the remainder for fixed expenses like rent and insurance, utilities and profit.