Computation of: Cost of Raw Materials Available For Use, Cost of Raw Materials Consumed or Used And Prime Cost of Production - SS2 Accounting Lesson Note

Cost of Raw Materials Available for Use:

To compute the cost of raw materials available for use, you need to add up the total cost of all the raw materials that are available to be used in the production process. This includes the cost of any raw materials that were purchased or produced during the accounting period, as well as any raw materials that were carried over from the previous period. Thus:

Cost of Raw Materials Available for Use = Beginning Raw Materials Inventory + Raw Materials Purchased or Produced During the Period

Cost of Raw Materials Consumed or Used:

To calculate the cost of raw materials consumed or used, you need to subtract the cost of any raw materials that remain in inventory at the end of the period from the cost of raw materials available for use. This will give you the cost of the raw materials that were actually used or consumed in the production process during the period. Thus:

Cost of Raw Materials Consumed or Used = Cost of Raw Materials Available for Use - Ending Raw Materials Inventory

Prime Cost of Production:

The prime cost of production is the sum of the direct costs of production, including the cost of raw materials, labour, and other direct costs associated with the production process. To calculate the prime cost of production, you need to add up the cost of raw materials consumed or used during the period, the cost of direct labour, and any other direct costs incurred during the production process. Thus: 

Prime Cost of Production = Cost of Raw Materials Consumed or Used + Direct Labor Cost + Other Direct Costs