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What does the term 'prime cost' refer to in a cost sheet?
What does the term 'prime cost' refer to in a cost sheet?
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Practice Questions
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What does the term 'prime cost' refer to in a cost sheet?
Total cost of production
Direct materials and direct labor costs
Total manufacturing overhead
Selling and administrative expenses
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Prime cost refers to the sum of direct materials and direct labor costs incurred in production.
Questions & Step-by-step Solutions
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Q
Q: What does the term 'prime cost' refer to in a cost sheet?
Solution:
Prime cost refers to the sum of direct materials and direct labor costs incurred in production.
Steps: 5
Show Steps
Step 1: Understand that 'prime cost' is a term used in accounting and finance.
Step 2: Know that prime cost includes two main components: direct materials and direct labor.
Step 3: Direct materials are the raw materials used to create a product.
Step 4: Direct labor refers to the wages paid to workers who are directly involved in making the product.
Step 5: To find the prime cost, you add the total cost of direct materials to the total cost of direct labor.
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