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    Question

    All of the following are Prime cost except

    _____
    A Raw material cost Correct Answer Incorrect Answer
    B Labor cost Correct Answer Incorrect Answer
    C Insurance of product Correct Answer Incorrect Answer
    D Packing material Correct Answer Incorrect Answer
    E Freight- in charges Correct Answer Incorrect Answer

    Solution

    Prime cost relates to the direct cost associated with the production of a product and includes direct material cost, direct labour cost and other direct expenses. A direct cost is cost traceable to the production of a specific item, such as a product or service. It includes  • the cost of the materials used to create a product • Freight charges paid to get the material for the product • Other consumables used in production • Labour cost associated with production • Primary packing of product produced Indirect costs are other costs not directly related to production and not associatable to a particular unit of product. These include: • rent • salaries • maintenance and repair • insurance • depreciation • interest

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