PRC-1 · Chapter 7 · Question 22 of 100
Which of the following definitions correctly describes 'Prime Cost'?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The sum of direct material and direct labor costs.
Explanation
Prime cost refers specifically to the direct, traceable costs of manufacturing a product, which consists of direct material costs and direct labor costs.
More IAS 2: Inventories MCQs
- Q24If an entity accidentally overstates its closing inventory value, what is the direct impact on the financial statements for that year?
- Q25Which of the following situations dictates that raw materials should NOT be written down below their cost?
- Q26How are trade discounts treated when determining the cost of inventory?
- Q27How should refundable sales taxes (e.g., input VAT) paid on the purchase of raw materials be treated?
- Q28A business has 200 units of stock. The units cost Rs. 22 each. What is the value of the closing stock?