Questions: Prime costs consists of: factory overhead and direct labor direct labor and direct materials factory overhead and direct materials

Prime costs consists of: factory overhead and direct labor direct labor and direct materials factory overhead and direct materials
Transcript text: Prime costs consists of: factory overhead and direct labor direct labor and direct materials factory overhead and direct materials
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Solution

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The answer is the second one: direct labor and direct materials.

Explanation: Prime costs are the direct costs of manufacturing a product, which include:

  • Direct labor: The wages of workers who are directly involved in the production process.
  • Direct materials: The raw materials that are directly used in the production of the product.

Factory overhead, on the other hand, includes indirect costs such as utilities, maintenance, and other expenses that are not directly tied to the production of a specific product. Therefore, factory overhead is not included in prime costs.

Summary: Prime costs consist of direct labor and direct materials.

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