What product costs and period costs go into making Dunkin’ donuts?

The first Dunkin’ restaurant opened in 1948 in Quincy, Massachusetts, and is still in operation today. The recipe for Dunkin’ donuts has been a secret for 65 years.  To see how Dunkin’ donuts are made, see the video at https://www.youtube.com/watch?v=EwTRmfWUxlw (0:43 min.).

The Dunkin’ donuts at a restaurant are not usually made at that location. For example, several Dunkin’ store owners in northeastern Ohio formed an affiliate kitchen manufacturing facility (Cleveland CPL) where the donuts are made fresh daily for each of the member franchises. Other brands’ products are also manufactured at this facility.

View a quick tutorial video about product and period costs at this link and then answer the following questions.

Questions

1. What is a product cost? What is a period cost?
2. Why is it important to sort costs into product costs and period costs?
3. What are some product costs related to Dunkin’ donuts?
4. What are some period costs related to the manufacture and sale of Dunkin’ donuts? (Use your imagination.)

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