Question

The following data were obtained from a burger restaurant during one of the financial periods:

The cost element	The cost amount
Burger meat	40000
Kitchen Workers salaries	25000
Supervisors salaries	15000
Kitchen equipment depreciation	10000
Restaurant rent	5000
The financial manager salary	5000

total of inventoriable (product) costs:

[[selectone]]

a. $75,000

b. $65,000

c. $100,000

d. $95,000

Answer 1

Solution:

Inventoriable or Product Cost includes the following costs:

> Direct Materials

> Direct Labour

> Manufacturing / Factory Overheads

Hence,only those costs from the restaurant will be taken into consideration for Inventorial/Product costs which are mentioned above

All the other costs which are administrative or selling expenses are Period Costs.

Let us first classify the given cost elements as Product Cost and Period Cost.

Classification of Cost Elements:

Burger Meat Product Cost (Direct Material)

Kitchen Workers Salaries Product Cost (Direct Labor)

Supervisors Salaries Period Cost (Administrative expense)

Kitchen equipment depreciation Product Cost (Manufacturing Overhead)

Restaurant Rent Period Cost (Administrative expenses)

The financial manager Salary Period Cost (Administrative expense)

Therefore, burger meat, kitchen workers salaries, kitchen equipment salaries will form part of Product Cost from the cost elements of the burger restaurant.

Total Inventoriable (Product) Cost :

Burger Meat    $40,000

Kitchen Workers Salaries   $25,000

Kitchen equipment depreciation $10,000

Product Cost $75,000

Therefore, the total inventorial / product cost of the burger restaurant is $75,000