Which of the following expenses constitutes prime cost?
I. Direct labour cost II. Factory overheads III. Hiring of machine for production IV. Warehouse rent
- I and II only
-
I and III only
- I, II and III only
- I,II and IV only
The correct answer is: 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.