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Simple English definitions for legal terms
prime cost
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A quick definition of prime cost:
Prime cost: The real amount of money paid for something when it was bought. For example, if you buy a toy for $10, the prime cost is $10. It's like the price tag on something you buy.
A more thorough explanation:
Definition: The actual cost of goods or services, including the cost of materials and labor.
Example: A bakery produces a cake that costs $10 in ingredients and $5 in labor. The prime cost of the cake is $15.
This example illustrates that the prime cost is the direct cost of producing a product or service. It does not include indirect costs such as rent or utilities. By calculating the prime cost, a business can determine the minimum price they need to charge to cover their expenses and make a profit.