Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 37

Classification of Costs The following is a list of costs from the accounting records of Sunshine Pool Management, Inc. Each of Sunshine’s 77 customers owns a pool. Sunshine maintains each customer’s pool by providing supplies, cleaning, and repairs.

1. Life saving supplies

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2. Salaries of Sunshine’s managers

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3. Pool chemicals

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4. Sunshine’s office rental expense

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5. Wages of lifeguards

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6. Workers’ compensation insurance

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7. Training for lifeguards

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8. pH testing supplies

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9. Office expense, including bookkeeping and clerical

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10. Depreciation on cleaning and testing equipment

Required Classify each item as direct or indirect assuming that the cost objects are each of 77 pools.

Step 1 of 2

A cost object for the product, service, customer, activity, or organizational unit for which the cost is allocated for some management resolution. The cost objects are product, service, and customers. It helps in decision making and performance measurement and strategy application.