Which of the following expenses constitutes prime cost? I. Direct labour cost II. Factory overheads III. Hiring of machine for production IV. Warehouse rent
A. I and II only B. I and III only C. I, II and III only D. I,II and IV only
Correct Answer: B
Explanation
Prime costs consist of direct materials and direct labor. Direct materials include all tangible components of a product. For example, direct materials include raw materials, supplies, and any other component that becomes part of the finished product.
