Question

Prime cost is:

a. indirect materials cost and indirect labor cost.
b. direct materials cost and direct labor cost.
c. direct labor cost and overhead cost.
d. selling cost and administrative cost.

Answer 1

Step-by-step explanation:

b. Direct materials cost and direct labor cost.

Prime cost refers to the direct costs of production, which includes direct materials cost (the cost of raw materials used in production) and direct labor cost (the wages and benefits paid to workers who directly produce the product). This is in contrast to indirect costs, such as indirect materials (supplies used in the production process), indirect labor (salaries and benefits paid to support staff), and overhead costs (indirect expenses incurred in running a business).