Here is a look at why it costs $2.50 for a single-dip ice cream cone at a typical store in…
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Here is a look at why it costs $2.50 for a single-dip ice cream cone at a typical store in Washington, DC. The annual sales volume (the number of ice cream cones sold) averages around 185,000 cones, bringing in revenue of $462,500. This is equivalent to selling more than 500 cones a day, assuming a seven-day operation. The following table shows the unit price of an ice cream cone and the costs that go into producing the product:ItemsTotal CostUnit Price*% of PriceIce cream (cream, sugar, milk, and milk solids)$120,250$0.6526%Cone9,2500.052Rent112,8500.6124Wages46,2500.2510Payroll taxes9,2500.052Sales taxes42,5500.239Business taxes14,8000.083Debt service42,5500.239Supplies16,6500.094Utilities14,8000.083Other expenses (insurance, advertising, fees, and heating and lighting for shop)9,2500.052Profit24,0500.135Total$462,500$2.50100
If you were to classify the operating costs into either product costs or period costs, how would you do it?
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