Prime cost consists of direct expenses, direct labour, and direct material.
Direct material refers to the cost of all materials that are used in the production process, including the cost of raw materials and any other materials that are used in the manufacturing process.
Direct labour refers to the wages, salaries, and other expenses associated with the workers who are directly involved in the manufacturing process.
Direct expenses refer to all expenses that can be traced back to the production process, such as the cost of utilities used in the manufacturing process or the cost of any equipment that is specifically used in the manufacturing process.
In summary, prime cost is the total cost of direct expenses, direct labour, and direct material used in the manufacturing process.