Prime Cost

A business’s expenses for the materials and labor it uses in production. Prime cost is a way of measuring the total cost of the production inputs needed to create a given output. By analyzing its prime costs, a company can determine how much it must charge for its finished product in order to make a profit. By lowering its prime costs, a company can increase its profit margin and/or undercut its competitors’ prices.

For example, the prime costs for creating a can of soda would include raw materials such as the aluminum needed for the cans, ink to customize the cans with the product’s brand name and logo, soda ingredients (i.e. carbonated water, caramel coloring, caffeine, sugar or aspartame and preservatives), freight charges to transport the raw materials to the manufacturing plant and the wages, taxes and benefits paid to or on behalf of the employees involved in the soda manufacturing process.


Investment dictionary. . 2012.

Look at other dictionaries:

  • prime cost — UK US noun [C] ► ACCOUNTING DIRECT COST(Cf. ↑direct cost) …   Financial and business terms

  • prime cost — n. The true price paid for something; the true cost of an item, including the material and labor used to produce it. The Essential Law Dictionary. Sphinx Publishing, An imprint of Sourcebooks, Inc. Amy Hackney Blackwell. 2008 …   Law dictionary

  • prime cost — prime′ cost′ n. that part of the cost of a commodity deriving from the labor and materials directly utilized in its manufacture • Etymology: 1710–20 …   From formal English to slang

  • prime cost — n. the direct cost of labor and material in producing an article, exclusive of capital, overhead, etc …   English World dictionary

  • prime cost — noun count or uncount BUSINESS the money that is needed for the materials and workers involved in making a product ─ compare OVERHEAD …   Usage of the words and phrases in modern English

  • prime cost — noun 1. : the combined total of raw material and direct labor costs incurred in production 2. : the direct or immediate cost of a commodity; specifically : the cost or expenses of producing or obtaining a commodity exclusive of general expenses… …   Useful english dictionary

  • prime cost — UK / US noun [countable/uncountable] Word forms prime cost : singular prime cost plural prime costs business the money that is needed for the materials and workers involved in making a product See: overhead …   English dictionary

  • prime cost — 1. *Direct costs in a manufacturing process. Prime costs usually exclude *overheads. 2. An alternative term for *conversion cost …   Auditor's dictionary

  • prime cost — noun Date: 1698 the combined total of raw material and direct labor costs incurred in production; broadly cost less vendor s or agent s commission for charges …   New Collegiate Dictionary

  • prime cost — that part of the cost of a commodity deriving from the labor and materials directly utilized in its manufacture. [1710 20] * * * …   Universalium

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