mMCQ.

Navigation Menu

Step into mMCQ.

Launch mMCQ. diagnostic

Explore mMCQ.

MDCAT prepFree DiagnosticPricing & SubscribeSign in

Resources

Terms & Conditions

mMCQ.

© 2021 - 2025 mMCQ.All rights reserved.

WhatsApp
O Level Accounting (7707)•7707/11/M/J/22
Question 27 from 7707/11/M/J/22

Explanation

Prime cost includes only direct production costs

Steps:

  • Recall prime cost formula: direct materials + direct labour + direct expenses.
  • Examine each option for exclusive inclusion of these elements.
  • Eliminate options containing indirect costs like overheads.
  • Confirm the matching option.

Why D is correct:

  • Prime cost comprises raw materials (direct materials), direct labour, and royalties (direct expenses on production), per cost accounting definitions.

Why the others are wrong:

  • A includes factory supervisor's wages, an indirect overhead.
  • B includes factory overheads, which are indirect costs.
  • C includes depreciation of factory machinery, an indirect overhead.

Final answer: D

Topic: Manufacturing accounts

Practice more O Level Accounting (7707) questions on mMCQ.me