Prime cost is
A) indirect materials cost and direct labor cost.
B) direct materials cost and direct labor cost.
C) direct labor cost and indirect labor cost.
D) direct materials cost and indirect labor cost.

Question

Quizplus · Accepted Answer

Prime cost includes only the costs that are directly involved in the production of a good or service. Direct materials cost and direct labor cost are directly incurred in the manufacture of a product or delivery of service, therefore they form the prime cost. Indirect labor costs, such as overhead expenses, are not included in prime cost. Likewise, indirect materials cost, such as consumables or supplies not directly tied to production, are not part of prime cost.

Prime Cost Is