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