Prime cost represents a major portion of a restaurant's total cost.

• A. A small portion of total cost
• B. A major portion of total cost
• C. Only labor costs
• D. Irrelevant to profitability

Answer: (B)

Prime cost is the sum of direct materials (food and ingredients) and direct labor—the costs you can most directly control through menu design, portioning, buying, and staffing. Because these two costs are the primary, controllable expenses in a restaurant kitchen, they usually make up a large share of total costs. In many operations, prime cost represents a major portion of the overall expense base, so it has a strong influence on profitability. This is why managers focus on reducing waste, tightening portion control, optimizing menus, and staffing efficiently to keep prime cost in line with sales. It’s not only labor costs since food costs are included, and it’s not a small portion or irrelevant to profitability.