Prime cost is comprised of which two cost categories?

Prime cost is comprised of which two cost categories?

• A. Food and beverage costs and Labor costs
• B. Labor costs and Other costs
• C. Food costs and Other costs
• D. Revenues and Profit

Answer: (A)

Prime cost focuses on the two costs most directly tied to producing and delivering menu items: the cost of the food and beverages themselves (cost of goods sold) and the labor needed to prepare and serve them. These are the controllable, variable expenses that management can influence most directly to impact profitability. Other costs fall into indirect or overhead categories, and revenues or profit are not costs at all. So the combination of food and beverage costs with labor costs is the correct pairing.

Prime cost focuses on the two costs most directly tied to producing and delivering menu items: the cost of the food and beverages themselves (cost of goods sold) and the labor needed to prepare and serve them. These are the controllable, variable expenses that management can influence most directly to impact profitability. Other costs fall into indirect or overhead categories, and revenues or profit are not costs at all. So the combination of food and beverage costs with labor costs is the correct pairing.