The correct answer is: D. both B and C
Manufacturing costs are the costs incurred in the manufacturing process of a product. They include direct materials, direct labor, and manufacturing overhead. Direct materials are the materials that are physically incorporated into the finished product. Direct labor is the labor that is directly involved in the manufacturing process. Manufacturing overhead is all other costs incurred in the manufacturing process that are not directly attributable to a specific product.
Prime costs are the costs of direct materials and direct labor. Conversion costs are the costs of direct labor and manufacturing overhead.
Therefore, both prime costs and conversion costs are terms used in manufacturing cost systems.