Prime cost includes which categories of expenses?

Prime cost includes which categories of expenses?

• A. Total restaurant expenses
• B. Only the cost of alcoholic beverages
• C. Includes expenses classified as Food, Labor, nonalcoholic beverages directly controlled by management
• D. Indirect overhead costs

Answer: (C)

Prime cost is the portion of costs that managers can most directly influence in producing meals and services. It includes the cost of the food itself, the direct labor used to prepare and serve, and nonalcoholic beverages that are directly controlled by management. Alcoholic beverages and indirect overhead costs are not part of prime cost because they fall outside the directly controllable or production-focused category. Tracking prime cost helps with pricing, budgeting, and labor scheduling by focusing on the expenses you can most readily manage to affect profitability.

Prime cost is the portion of costs that managers can most directly influence in producing meals and services. It includes the cost of the food itself, the direct labor used to prepare and serve, and nonalcoholic beverages that are directly controlled by management. Alcoholic beverages and indirect overhead costs are not part of prime cost because they fall outside the directly controllable or production-focused category. Tracking prime cost helps with pricing, budgeting, and labor scheduling by focusing on the expenses you can most readily manage to affect profitability.