Q.Distinguish between Prime Cost and Overhead.

Prime Cost and Overhead sit on opposite sides of the same traceability test — one is directly identifiable with a specific unit, the other must be spread across units by a chosen basis.

Prime Cost (Direct Material + Direct Wages + Direct Expenses) is charged to a unit in its actual, directly-traceable amount. Overhead (Indirect Material + Indirect Labour + Indirect Expenses) cannot be traced to one unit and must instead be apportioned across units/departments on a reasonable basis.

The fundamental distinction is traceability: every rupee of Prime Cost can be pointed at a specific unit and said, with certainty, 'this rupee was spent making THAT unit.' No rupee of Overhead can be pointed at in that way — it was spent running the department or business generally, and must be shared out across all the units/departments that benefited from it, using a basis that is reasonable but necessarily an estimate rather than a directly-observed fact.

A common shallow answer states only 'Prime Cost is direct and Overhead is indirect' without explaining WHY that distinction matters in practice — the deeper point examiners look for is that this difference in traceability is exactly why Overhead needs a distribution PROCEDURE (Allocation/Apportionment, Section 5.B) while Prime Cost never does.