EXERCISE 12-1B SOLUTION

a.

Items	Direct Cost	Indirect Cost
Depreciation on home office building		X
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 project
Depreciation on home building equipment (small tools such as hammers or saws)
Company presidents salary
Depreciation on crane used in commercial construction

b.

Items	Direct Cost	Indirect Cost
Depreciation on home office building		X
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 project
Depreciation on home-building equipment (small tools such as hammers or saws)
Company presidents salary
Depreciation on crane used in commercial construction

EXERCISE 12-1B (Sol. cont.)

c.

Items	Direct Cost	Indirect Cost
Depreciation on home office building	X
Salary of corporate office manager
Wages of worker 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 project
Depreciation on home-building equipment (small tools such as hammers or saws)
Company presidents salary
Depreciation on crane used in commercial construction

Exercise 12-1B Direct versus indirect costs Tapper 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 three projects. Cost items of the company follow: 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) Company president's salary Depreciation on crane used in commercial construction 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 Tapper Construction Company as a whole