Prime costs consist of
A) direct labour and manufacturing overhead.
B) direct materials and direct labour.
C) direct materials and manufacturing overhead.
D) direct materials, direct labour and manufacturing overhead.

Question

Quizplus · Accepted Answer

Prime costs include only those costs that are directly linked to the manufacturing of a product or provision of a service. Direct materials and direct labour are the two primary components of prime costs, as they directly contribute to the production process. Manufacturing overhead, while still a cost associated with production, is not considered a prime cost as it includes indirect costs such as rent, utilities, and depreciation.

Prime Costs Consist of