What Is Prime Cost Example?
Prime cost refers to the total direct costs associated with the production of a particular item or service. This includes the costs of materials and labor used in the production process. For example, for a furniture maker, the prime cost would include the cost of wood, screws, hinges, and labor wages that are directly involved in the production of each piece of furniture. Prime cost is an important metric for businesses to track because it directly impacts the profitability of each product or service they offer.