Final answer:
Direct labor is a prime cost since it's a variable cost directly associated with the production process and affects the cost of manufacturing as production levels change.
Step-by-step explanation:
The correct option : d
The prime cost in a business refers to the direct costs of manufacturing a product, which include direct materials and direct labor. These are costs that are directly traceable to the production process.
Fixed costs, on the other hand, such as factory depreciation, are not considered prime costs because they do not change with the level of production and are not directly traceable to the creation of a product. Indirect materials and administrative expenses do not fall under prime costs either, as they are not directly associated with the production of a specific product.In summary, direct labor is a prime cost because it is a variable cost that varies based on the level of production and is directly attributable to the creation of a product.