Prime Cost Components in Manufacturing

Steps:

• Identify prime cost as the total of all costs directly attributable to production in the manufacturing account.
• Recall that prime cost includes direct materials, direct labor, and direct expenses (e.g., royalties or special tooling).
• Eliminate options limiting to subsets like only materials or materials plus labor.
• Select the option encompassing all direct production elements without overheads.

Why D is correct:

• Prime cost equals direct production costs (materials + labor + expenses), per standard manufacturing accounting definitions, excluding indirect overheads.

Why the others are wrong:

• A omits direct expenses like royalties, making it incomplete.
• B ignores direct labor and expenses essential to prime cost.
• C repeats "cost" redundantly and excludes labor and expenses.

Final answer: D