Bhimani, Horngren,
Datar and Rajan,
Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
17
© Pearson Education Limited 2012
• Indirect costs of a cost object are those costs that are related to the particular cost object but cannot be traced to it in an economically feasible (cost-effective) way. Assume that the cost object is a Macintosh computer product. Apple assembles multiple products in each of its plants. The computer screen is a direct cost of the Macintosh.
In contrast, the salary of the security guard at the plant where the Macintosh is assembled would bean indirect cost of the Macintosh.
2.3 Consider a supervisor’s salary in a maintenance department of a telephone company. If the cost object is the department, the salary is a direct cost. If the cost object is
a telephone call by a customer, the salary is an indirect cost.
2.4 Factors affecting the classification of a cost as director indirect include
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