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WAEC Financial Accounting 2016 Question 22

Question 22

Manufacturing Accounts

Which of the following expenses constitutes prime cost? I. Direct labour cost II. Factory overheads III. Hiring of machine for production IV. Warehouse rent

  1. A.I and II only
  2. B.I and III only
  3. C.I, II and III only
  4. D.I, II and IV only
Show the answer and explanation

Answer: B (I and III only)

Explanation

Prime cost is direct costs only: direct labour and direct expenses such as hire of a machine for production.