Prime cost includes _______.
A. direct materials, direct wages and indirect expenses
B. indirect materials and indirect labour and indirect expenses
C. direct materials, direct wages and direct expenses
D. direct materials, indirect wages and indirect expenses
Answer: Option C
Solution(By Examveda Team)
Prime cost includes direct materials, direct wages and direct expenses. Prime costs are a firm's expenses directly related to the materials and labor used in production. It refers to a manufactured product's costs, which are calculated to ensure the best profit margin for a company.Join The Discussion
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Related Questions on Costing
Basic objective of cost accounting is ________
A. tax compliance.
B. financial audit.
C. cost ascertainment.
D. profit analysis.
Process costing is suitable for ________.
A. hospitals
B. oil refing firms
C. transport firms
D. brick laying firms
The cost which is to be incurred even when a business unit is closed is a _____.
A. imputed cost
B. historical cost
C. sunk cost
D. shutdown cost
Answer should be option A,because direct material used is the major portion of product cost while direct labour is the second major element these two are the direct expenditures occurred. While other indirect expenses such as supervisors, clerks salary,electricity,water,gas,stationary etc. Fixed and variable indirect expenses together constitute overheads, these are incidental to production,indirectly.
Thus we can say that prime cost is equal to direct material, direct labour and indirect expenses or overheads.