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      Question

      Which of the following cost will not be a part of the

      Prime cost of a product?
      A Raw material Correct Answer Incorrect Answer
      B Labor Correct Answer Incorrect Answer
      C Rent Correct Answer Incorrect Answer
      D Packing material Correct Answer Incorrect Answer
      E Freight- in 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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