Bunn Department Stores Inc. has three departments: women’s, men’s, and children’s. The following are the indirect costs related to its operations.
Payroll taxes
Paper rolls for cash registers
Medical insurance
Salaries of secretaries
Water bill
Vacation pay
Sewer bill
Staples
Natural gas bill
Pens
Ink cartridges
Required
a. Organize the costs in the following three pools: indirect materials, indirect labor, and indirect utilities, assuming that each department is a cost object.
b. Identify an appropriate cost driver for each pool.
c. Explain why accountants use cost pools.