ECONOMICS

Detailed explanation-1: -Key Takeaways. 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 can be calculated using the following formula: Prime cost = direct materials cost + direct labor cost.

Detailed explanation-3: -The total of direct materials, direct labour, and direct expenses is known as the direct cost of sales.

Detailed explanation-4: -Prime costs are the combination of the two direct product costs: direct materials costs and direct labor costs. Conversion costs include the manufacturing costs that are needed to convert direct materials into final products: direct labor costs and manufacturing overhead costs.

Detailed explanation-5: -Direct costs are expenses that can be directly tied to the production of a product and can include direct labor and direct material costs. Direct costs can be fixed costs such as the rent for a production plant.