The prime cost is the total of the direct costs of production. It includes the cost of direct materials, direct labor, and direct expenses that are directly related to the production process. Direct material refers to the raw materials that are used in the production process, direct labor refers to the wages or salaries paid to workers directly involved in the production process, and direct expenses refer to other costs that are directly related to the production process such as fuel and power. The prime cost excludes indirect costs such as administrative expenses and selling and distribution expenses.