Classification of Costs; Customer Profitability
Pet Partner is a small company that provides pet boarding, grooming, and minor medical services for dogs and cats. The company has been successful for its first three years because of its careful attention to customer expectations. The staff knows the names of each customer’s pet, their food preferences, and their individual preferences. The company is now studying the profitability of the business, using each customer as a cost object. In the business, there are a number of costs:
1. Staff salaries.
2. Rent on office and work space used by the company.
3. Licenses and fees.
4. Supplies; grooming supplies and related items.
5. Medications.
6. Legal fees.
7. Accounting services provided part time by practicing accountant.
8. Pet food.
9. Utilities for office and work space.
10. Fire insurance for office and work space and its contents.
11. Liability insurance for the company business.
Required
1. For each cost category, indicate whether it is direct or indirect relative to the company’s cost object.
2. Describe how Pet Partner could use the information in (1) to assess the profitability of each customer.
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