ABSTRACT
The term "Prime Cost" is one which is often used, but it has no generally accepted precise meaning. It is in manufacturing businesses that the necessity for costing as an aid to selling price really arises. A normal business: earns profit, ascertains the amount so earned, and distributes it. A great deal of our work is necessitated by the complex monetary interests incidental to a modern industrial State, and is concerned largely with ascertaining the profit earned by a concern and its proper distribution. Prime cost comes the share of the expenses of carrying on the manufacture and of selling the product. The plight of a manufacturer in bad trade is really even worse than suggested above, for this reason: The average percentage to be added to prime cost to provide for standing expenses is, or ought to be, calculated not on actual output, but on normal output.
