Identifying Indirect Costs in Restaurant Accounting

Steps:

• Direct costs are traceable to specific products, like food preparation; indirect costs support overall operations but aren't directly tied.
• Cost 1 (food ingredients) is direct, as it's used in specific meals.
• Cost 2 (appliance maintenance) is indirect, as it benefits the entire kitchen without tracing to one dish.
• Cost 3 (chefs' wages) is direct labor for producing meals; cost 4 (manager's wages) is indirect administrative overhead.

Why C is correct:

• Indirect costs, per accounting standards, include overhead not directly allocable to production; 2 and 4 fit as facility and management expenses supporting all output.

Why the others are wrong:

• A includes 1, a direct material cost.
• B includes 1 and 3, both direct production costs.
• D includes 3, direct labor for food preparation.

Final answer: C