COST ACCOUNTING
INTRODUCTION TO COST ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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materials costs plus direct labour costs
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materials costs plus production overheads
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direct labour costs plus production overheads
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production overheads plus materials costs plus direct labour costs
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Detailed explanation-1: -A prime cost is the total direct costs of production, including raw materials and labor. Indirect costs, such as utilities, manager salaries, and delivery costs, are not included in prime costs. The prime cost equation is equal to the cost of raw materials plus direct labor.
Detailed explanation-2: -Prime costs include direct material and direct labor costs. Conversion costs include direct labor and overhead expenses. Both are a metric used to determine the efficiency of production.
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: -Direct Labor + Direct Material = Prime Costs Accountants break down product costs into three categories: direct material, direct labor, and manufacturing overhead.
Detailed explanation-5: -Product costs are costs that are incurred to create a product that is intended for sale to customers. Product costs include direct material (DM), direct labor (DL), and manufacturing overhead (MOH).