Prime cost
Prime cost is the total of direct materials and direct labour — the two costs traceable to a product without any allocation step. Overhead is excluded.
Also known asprime costs
See it move
A split bar shows prime cost of €110 per unit broken into two directly traceable segments: direct materials at €80 and direct labour at €30. A note grounds the numbers in a dining table — 10 kg of timber at €8 per kilogram accounts for the €80 material cost, and two hours of labour at €15 per hour accounts for the €30 labour cost.
The formula
Variables
- Direct materials cost (€)
- Direct labour cost (€)
Check yourself
A furniture workshop produces one dining table. Unit costs are: hardwood (direct material) €180, assembly wages (direct labour) €90, factory electricity allocated to the unit €30, and varnish (direct material) €25. What is the prime cost of one table?