Question

Just arrived at the Sydney International Airport is a new vending machine that dispenses travel socks. This is a vending machine from ZZZ Socks Ltd. The socks have patterns on them such as the Australian flag, koalas, kangaroos, there are regular socks and flight-compression socks. The airport traveller can purchase the socks by using a credit card, the person chooses the socks they want to buy using a keypad, and the socks are then dispensed out into a tray at the bottom of the machine. ZZZ Socks Ltd also sells its socks through retailers, in its own retail stores around Australia, via vending machines, and also through a monthly subscription service.
(a) What costs would ZZZ Socks Ltd incur related to its sock vending machine located at the Sydney International airport? Assume that ZZZ Socks Ltd rents the vending machine from a vending service on a 12 monthly basis. Use your imagination and list as many costs as you can.

(b) Now classify each of the costs you listed for part (a) as direct or indirect, assuming that the vending machine is the cost object.
(c) Which costing system would be most appropriate for ZZZ Socks Ltd: Job costing or Process costing. Provide a reason for your choice of costing system

Answer 1

a.) Costs associated with ZZZ Socks Ltd related to its sock vending machine.

1. Vending machine rentals

2. Taxes

3. Hiring charges for Vending machine refill service

4. Repairs and maintenance of vending machine.

5. Insurance

6. Administrative cost

b.) Direct cost

1. Vending machine rentals

2. Hiring charges for Vending machine refill service

3. Repairs and maintenance of vending machine

Indirect Cost

1. Taxes

2. Insurance

3. Administrative cost

C.) Job costing is more appropriate for ZZZ Socks limited as the company can have control over costs for each of its vending machines across the country by implementing job costing system.