Direct versus indirect costs
Jeelani Construction Company is composed of two divisions: (1) Home Construction and (2) Commercial Construction. The Home Construction Division is in the process of building 12 houses and the Commercial Construction Division is working on 3 projects. Cost items of the company follow.
Company president’s salary
Depreciation on crane used in commercial construction
Depreciation on home office building
Salary of corporate office manager
Wages of workers assigned to a specific construction project
Supplies used by the Commercial Construction Division Labor on a particular house
Salary of the supervisor of commercial construction projects
Supplies, such as glue and nails, used by the Home Construction Division
Cost of building permits
Materials used in commercial construction projects
Depreciation on home building equipment (small tools such as hammers or saws)
Required
a. Identify each cost as being a direct or indirect cost assuming the cost objects are the individual products (houses or projects).
b. Identify each cost as being a direct or indirect cost, assuming the cost objects are the two divisions.
c. Identify each cost as being a direct or indirect cost assuming the cost object is Jeelani Construction Company as a whole.
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