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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.
Memorize this: FC% = (BI + P - EI) / S. Food cost is calculated by taking your beginning (AKA opening) inventory for the period (e.g. at Oracle itâs one week) and adding all of your purchases to that number. You then subtract the ending (AKA closing) inventory number. This gives you the theoretical value of what you used that week in product.