[amp_mcq option1=”direct materials, direct wages and indirect expenses” option2=”indirect materials and indirect labour and indirect expenses” option3=”direct materials, direct wages and direct expenses” option4=”direct materials, indirect wages and indirect expenses” correct=”option3″]
The correct answer is: C. direct materials, direct wages and direct expenses.
Prime cost is the direct costs incurred in the production of a product. It includes the cost of direct materials, direct labor, and direct expenses.
- Direct materials are the materials that are used in the production of a product and can be easily traced to the finished product. For example, the wood used to make a table is a direct material.
- Direct labor is the labor that is directly involved in the production of a product. For example, the labor of the workers who assemble the table is direct labor.
- Direct expenses are the expenses that are directly related to the production of a product. For example, the cost of the electricity used to power the machines that assemble the table is a direct expense.
Indirect materials, indirect labor, and indirect expenses are not included in prime cost. These costs are not directly related to the production of a product and cannot be easily traced to the finished product. For example, the cost of the electricity used to light the factory is an indirect expense.
I hope this helps!