   # A firm has $100,000 in direct materials costs,$50,000 in direct labor costs, and $80,000 in overhead. Which of the following is true? a. Prime costs are$150,000; conversion costs are $180,000. b. Prime costs are$130,000; conversion costs are $150,000. c. Prime costs are$150,000; conversion costs are $130,000. d. Prime costs are$180,000; conversion costs are $150,000. BuyFindarrow_forward ### Managerial Accounting 15th Edition Carl Warren + 1 other Publisher: South-Western College Pub ISBN: 9781337912020 #### Solutions Chapter Section BuyFindarrow_forward ### Managerial Accounting 15th Edition Carl Warren + 1 other Publisher: South-Western College Pub ISBN: 9781337912020 Chapter 1, Problem 3CMA Textbook Problem 25 views ## A firm has$100,000 in direct materials costs, $50,000 in direct labor costs, and$80,000 in overhead. Which of the following is true? a. Prime costs are $150,000; conversion costs are$180,000. b. Prime costs are $130,000; conversion costs are$150,000. c. Prime costs are $150,000; conversion costs are$130,000. d. Prime costs are $180,000; conversion costs are$150,000.

To determine

Identify the correct option for the given statement.

### Explanation of Solution

Prime cost:

Prime cost refers to a cost which is directly involved in the process of manufacturing an item. Prime cost includes direct material, and direct labor costs.

Conversion cost:

A conversion cost refers to the cost of converting the raw materials into a finished product. Conversion cost includes direct labor as well as factory overhead costs.

Calculate the amount of prime costs and conversion costs:

Prime costs:

Prime cost = Direct materials + Direct labor=$100,000 +$50,000=$150,000 Therefore, the prime costs are$150,000

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