Which combination represents prime cost in cost accounting?
Correct answer: D. Direct materials, direct labour and direct expenses
- A. Factory overhead, selling costs and direct expenses
- B. Direct materials, factory rent and office salaries
- C. Direct labour, selling expenses and administration costs
- D. Direct materials, direct labour 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.
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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.
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