Susie owns a small manufacturing company Cold As Snow that m

Susie owns a small manufacturing company, Cold As Snow, that makes ice packs for use in coolers. In a time study, her three workers averaged 15 minutes to build each ice pack. Susie\'s labor cost is $37.20 per hour. If the direct materials cost per item is $1.82, what is the prime cost for each ice pack?

Solution

Prime Cost = Raw Materials + Direct Labor

raw material cost per icw pack = 1.82

labour charge per hour = 37.20

tiame taken to complete 1 ice pack = 3 *15 min = 45 min = 3/4 hour

so labor cost per ice pack = 37.20 *3/4 = 27.9

hence

prime cost = 1.82 + 27.9 = = 29.72