ECONOMICS

Detailed explanation-1: -Example of How to Use Prime Cost The materials directly contributing to the table’s production cost $200. The woodworker charges $50 per hour for labor, and this project takes three hours to complete. The prime cost to produce the table is $350 ($200 for the raw materials + $150 in direct labor).

Detailed explanation-2: -prime cost in British English noun. the portion of the cost of a commodity that varies directly with the amount of it produced, principally comprising materials and labour. Also called: variable cost.

Detailed explanation-3: -Explanation: Prime Cost: It consists of the costs of direct materials that go into the product, the costs of direct labor and direct expenses. It is also known as direct cost or first cost.

Detailed explanation-4: -Prime costs comprise a company’s direct material and direct labor costs. Businesses calculate prime costs when analyzing manufacturing expenses, efficiency, and profitability. Accountants break down product costs into three categories: direct material, direct labor, and manufacturing overhead.