The direct cost of sales, also known as the prime cost, refers to the aggregate expenses directly tied to the production of a good or service, encompassing direct materials, direct labor, and direct expenses, while excluding overhead costs.
A basis used in absorption costing for allocating manufacturing overhead to the cost units produced. This method involves applying a percentage of the prime cost to determine the overhead allocation.
Prime cost is a crucial accounting term reflecting the direct costs of production, typically including direct materials and direct labor expenses.
