Prime cost

Explanation: Prime cost is a fundamental concept in cost accounting, particularly in manufacturing. It represents the total direct costs involved in the production of goods or services. Prime cost consists of three main components:

1. Direct materials: The raw materials that can be directly traced to and are integral parts of the finished product.
2. Direct wages (or direct labor): The wages paid to workers directly involved in the production of goods.
3. Direct expenses: Any other expenses that can be directly attributed to the production of a specific product or service.

Prime cost is crucial for pricing decisions, cost control, and profitability analysis in manufacturing businesses. It forms the basis for calculating the total cost of production when combined with overhead costs.