Q.

Prime cost is equal to -

A. Variable cost plus administrative cost
B. Variable cost plus fixed costs
C. Variable cost only
D. Fixed cost only
Answer» A. Variable cost plus administrative cost
Explanation: Prime Cost refers to a business's expenses for the materials and labor it uses in production. Prime cost is a way of measuring the total cost of the production inputs needed to create a given output. By analyzing its prime costs, a company can determine how much it must charge for its finished product in order to make a profit. Variable costs are expenses that change in proportion to the activity of a business. Variable cost is the sum of marginal costs over all units produced.
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