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      Question

      Prime cost refers to which among the following?

      A Direct Cost + Indirect Cost Correct Answer Incorrect Answer
      B All the overheads Correct Answer Incorrect Answer
      C Direct Material + Indirect Material Correct Answer Incorrect Answer
      D Direct Labour + Indirect Labour Correct Answer Incorrect Answer
      E Direct Material + Direct Labour + Direct Expenses Correct Answer Incorrect Answer

      Solution

      Prime costs are the sum of direct costs incurred during the manufacture of a product. These costs comprise Direct Material, Direct Labour and Direct Expenses. Prime cost does not include indirect expenses like factory rent or supervisor’s salary.

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