Classifying costs; direct costs: restaurant Indicate whether each of the following costs is a direct cost...

Classifying costs; direct costs: restaurant Indicate whether each of the following costs is a direct cost for an individual franchise of a gourmet pizza chain, providing reasons to explain your answer:

(a) cost of food served
(b) pizza chef’s salary and labour on-costs
(c) costs allocated to each franchise for head office design of the standard pizza menu
(d) shared costs for franchise marketing, which is managed by the franchise head office
(e) depreciation on the wood-fired oven
(f) cost of advertising initiated by the individual franchise to promote its availability for functions and events.

Expert Solution

(a) cost of food served- direct cost as the object of restaurant is to provide food. So the cost incurred for making food which includes all the ingredients will be direct cost.

(b) pizza chef's salary and labour on cost- direct cost The salaries and labour given are for preparation and serving of food, so it is a direct cost

(C) costs allocated to each franchise for head office design of the standard pizza menu- indirect costs

Direct costs in a restaurant are the cost of served food which includes all the ingredients and all the labour to make and serve food. So cost allocated for the design of pizza menu will be an indirect cost.

(D) shared costs for franchise marketing, which is managed by the franchise head office - indirect costs

Direct costs in a restaurant are the cost of served food which includes all the ingredients and all the labour to make and serve food. so the costs incurred for franchise marketing will be an indirect costs

(e) Depreciation on wood fired oven- direct cost

Pizzas served in restaurant are made using the wood fired oven. So for making pizza, oven is a must. The depreciation expense on such oven will be treated as a direct cost. If such oven is not a must for making pizza, the depreciation expense will be an indirect cost.

(f) cost of advertising initiated by the individual franchise to promote its availability for functions and events- indirect costs

Direct costs in a restaurant are the cost of served food which includes all the ingredients and all the labour to make and serve food. so the costs incurred for advertising to promote its availability for functions and events are indirect costs.

ekkarill92 answered 2 years ago

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Classifying costs; direct costs: restaurant Indicate whether each of the following costs is a direct cost...

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