WAEC Accounting 2012 Paper

Concept:Prime cost includes all direct costs incurred in production.Explanation:Prime cost is calculated as:$$\text{Prime cost} = \text{Direct materials} + \text{Direct labour} + \text{Direct expenses}$$Royalty, when paid on the basis of production or output, is treated as a direct expense.Therefore, royalty is included under prime cost.Depreciation, factory rent, and factory electricity are production overheads.These are indirect costs and are not part of prime cost.Answer:B. royalty