Which of the following expenses constitutes prime cost? I. Direct labour cost
II. Factory overheads
III. Hiring of machine for production
IV. Warehouse rent
I and II only
I and III only
I, II and III only
I,II and IV only
Correct answer is B
Prime costs consist of direct materials and direct labor. Direct materials include all tangible components of a product. For example, direct materials include raw materials, supplies, and any other component that becomes part of the finished product.