Which combination represents prime cost in cost accounting?
Correct answer: A. Direct materials, direct labour and direct expenses
- A. Direct materials, direct labour and direct expenses
- B. Direct materials, factory rent and office salaries
- C. Direct labour, selling expenses and administration costs
- D. Factory overhead, selling costs and direct expenses
Explanation
Prime cost consists of all directly traceable production costs: direct materials, direct labour and direct expenses. Factory overhead and selling or administrative costs are not part of prime cost.
Last updated
About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
Practise Cost Accounting
50 free Cost Accounting MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Accounting questions like this
Accounting is on this paper prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for it.
Related questions
A company accepts a special order using spare production capacity. Which cost is most important in deciding whether to accept it?
A company has fixed costs of Rs. 90,000 and a contribution margin ratio of 30 percent. What sales revenue is required to break even?
A company's actual sales are Rs. 500,000 and its break-even sales are Rs. 350,000. What is its margin of safety?
A cost that management can significantly influence within a given period is called a:
A factory applies Rs. 200,000 of overhead to production, while its actual overhead is Rs. 210,000. What is the result?