Which cost is considered part of prime cost?

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Multiple Choice

Which cost is considered part of prime cost?

Explanation:
Prime cost is the sum of costs that can be directly traced to producing the product: direct materials and direct labour. These are the costs assigned straight to each unit of output. Indirect overhead, administrative salaries, and advertising are not directly tied to a specific product or unit—they are either manufacturing overhead, period costs, or selling costs. Therefore, the pair that fits prime cost is direct materials and direct labour.

Prime cost is the sum of costs that can be directly traced to producing the product: direct materials and direct labour. These are the costs assigned straight to each unit of output. Indirect overhead, administrative salaries, and advertising are not directly tied to a specific product or unit—they are either manufacturing overhead, period costs, or selling costs. Therefore, the pair that fits prime cost is direct materials and direct labour.

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