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a direct material + direct labour
b direct labor + factory over head
c direct labour + variable overhead
d direct labour + fixed over head
a. direct material + direct labor :)
Prime Cost = direct material + direct labour
Conversion costs = direct labour + manufacturing overheads
prime cost is a combination of direct material + direct labor
Prime cost is the combination of a manufactured product's costs of direct materials and direct labor.
Prime cost is consist of all direct costs (Costs which can be traced directly to the product). These are direct material, direct labour and direct expense. Overheads are indirect costs (costs which can not be directly attributable to the product). Hence, option (a) is correct here.
Direct labor + Direct material
As the word 'Prime' indicates 'Key, Major, First or Main' the prime cost refers to the major cost of production which is a) Direct Labour+Direct Material'
Prime cost is the cost directly traceable to the product and thus the prime cost consist of Dirrect Labour and Direct Materials. All other options have overheads and overheads can not be directly traced to product and so dosn't make sense.
a. Direct Material + Direct labor = Prime Cost
Prime cost includes materials and labor cost.
Prime cost= Direct material + Direct labour
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