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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.
Prime cost (straight line) method. Under the prime cost method (also known as the straight line method), you claim a fixed amount each year based on the following formula: Assetâs cost Ã (days held/365) Ã (100%/assetâs effective life)