Which cost is considered part of prime cost?

Unlock all questions

This demo includes only 20 questions. Upgrade to access hundreds of questions, flashcards, exam simulations, and disable ads.

Full question bankExam simulationsFlashcards
From $9.99Unlock all

Enhance your management accounting skills with the AAT Level 3 MATS Test. Utilize multiple choice questions with detailed explanations to prepare for the exam confidently.

Multiple Choice

Which cost is considered part of prime cost?

Explanation:
Prime cost is the sum of costs that can be directly traced to producing the product: direct materials and direct labour. These are the costs assigned straight to each unit of output. Indirect overhead, administrative salaries, and advertising are not directly tied to a specific product or unit—they are either manufacturing overhead, period costs, or selling costs. Therefore, the pair that fits prime cost is direct materials and direct labour.

Prime cost is the sum of costs that can be directly traced to producing the product: direct materials and direct labour. These are the costs assigned straight to each unit of output. Indirect overhead, administrative salaries, and advertising are not directly tied to a specific product or unit—they are either manufacturing overhead, period costs, or selling costs. Therefore, the pair that fits prime cost is direct materials and direct labour.

More Multiple Choice Questions
Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy