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Accountancy question from FAA exam, 2024 by JKSSB

Calculate the prime cost from the following information:

Direct material purchased: Rs. 1, 00,000
Direct material consumed: Rs. 90,000
Direct labour: Rs. 60,000
Direct expenses: Rs. 20,000
Manufacturing overheads: Rs. 30,000

Last updated May 13, 2026
Correct Answer: Option C — Rs. 1,70,000
Prime Cost is the sum of all direct costs involved in manufacturing a product. 
It specifically excludes indirect costs (overheads).The formula is: {Prime Cost} = {Direct Material Consumed} + {Direct Labour} + \text{Direct Expenses}

Step-by-Step Breakdown:
Direct Material Consumed: Rs. 90,000 (Note: We use the amount consumed, not the amount purchased, as only what was used in production adds to the cost of the goods made).Direct Labour : Rs. 60,000Direct Expenses: Rs. 20,000
Total: 90,000 + 60,000 + 20,000 =Rs. 1,70,000
Why other figures were excluded: 
Direct Material Purchased (Rs. 1,00,000): This is a red herring. We only account for the Rs. 90,000 actually used; the remaining Rs. 10,000 stays in "Closing Stock."Manufacturing Overheads (Rs. 30,000): These are indirect costs. If we added these to the Prime Cost, we would get the Works Cost (or Factory Cost), which would be Rs. 2,00,000 (Option B).
Answer verified by Quintessence Classes faculty — Karan Nagar, Srinagar.
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JKSSB FAA 2024

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Exam JKSSB
Recruitment FAA
Year 2024
Subject Accountancy
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