Multiple choice

Prime cost is equal to

  1. variable cost plus administrative cost

  2. variable cost plus fixed costs

  3. variable cost only

  4. fixed cost only
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Prime cost in cost accounting equals variable costs (direct materials + direct labor + direct expenses) plus fixed costs (indirect manufacturing costs). It represents the total production cost. Option B is correct - prime cost = variable cost + fixed costs.

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