Majority of the candidates attempted this questions and performed well in question 3(b) only.
(a) (i) - Prime Cost is the sum of all costs that are directly related to production.
- Prime cost is cost that is traceable to each unit of material produced.
- Prime cost is the sum of direct material cost, direct labour cost and direct expenses.
(ii) The components of prime cost are:
- Direct materials cost: It is the cost of materials used up in production/manufacturing.
- Direct labour cost: It is the wages paid to persons working directly in the production/manufacturing process.
- Direct expenses: These are expenses incurred directly for the purpose of production/manufacturing.
(b) Uses of Control Accounts
- It is used to detect missing figures;
- It is used to prepare interim final accounts;
- It facilitates easy identification of errors;
- It serves as a form of internal control;
- It enables the ascertainment of trade debtors and trade creditors’ amounts;
- It helps to prevent fraud;
- It helps to group similar accounts;
- It is used to provide timely information to customers;
- It enables the ascertainment of credit sales and credit purchases.
