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| 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 | |
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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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