i. Direct materials

ii.Direct labour

iii.Direct expenses

iv. Factory expenses

Prime cost consist of

  • A i, ii and iii
  • B i, ii and iv
  • C i, iii and iv
  • D ii, iii and iv
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The correct answer is A. i, ii and iii

Prime cost is the direct cost of a commodity in terms of the materials and labour involved in its production, excluding fixed costs. Direct material and direct labor costs are prime cost because they are the main incremental costs of a product.

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