Prime costs are the combination of direct labor costs and factory overhead costs.

Prime Costs

Direct materials and direct labor costs that are directly associated with the production of goods.

Factory Overhead Costs

Expenses related to operating a factory that cannot be directly traced to specific units produced, such as electricity, maintenance, and rent of the factory space.

Direct Labor Costs

Costs that are directly associated with the production of goods or services, typically wages paid to workers directly involved in manufacturing or production.