Complete this question by entering your answers in the tabs below.Required A Required BRequired CIdentify each cost as being a direct or indirect cost assuming the cost objects are the individual products (houses or projects).ItemsWages of workers assigned to a specific construction projectSupplies used by the Commercial Construction DivisionLabor on a particular houseSalary of the supervisor of commercial construction projectsSupplies, such as glue and nails, used by the Home Construction DivisionCost of building permitsMaterials used in commercial construction projectsDepreciation on home building equipment (small tools such as hammers or saws)Company president's salaryDepreciation on crane used in commercial constructionDepreciation on home office buildingSalary of corporate office manager< Required ARequired B>

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Step 1: Meaning of direct costs and indirect costs :

Direct costs :

These are the costs whether fixed or variable which are directly identifiable with a particular product, job, service or activity.

Direct costs are also called as traceable costs. Besides direct materials cost and direct labor cost, all direct expenses such as hire charges of a special machine for a specific job, which can be identified with a given product, job, service or activity also form part of direct cost.

Indirect costs :

The costs which can't be readily identified with products or services but are generally incurred in carrying out production activity.

e.g. Depreciation on home office building, supplies such as glue and nails used by the home construction division etc.

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