Question

Cost Classifications for a service company

A partial list of The Grand Hotel’s costs follows:

1. What would be The Grand Hotel’s most logical definition for the final cost object?

2. Identify whether each of the costs is to be classified as direct or indirect. For purposes of classifying each cost as direct or indirect, use the hotel guest as the cost object.

Costs	Classification
a. Advertising in local newspaper
b. Bedding (sheets, blankets, pillows)
c. Bellhop wages
d. Champagne for special guest packages
e. Coffee and tea for rooms
f. Cost of customer surveys
g. Depreciation of the hotel
h. Desk clerk wages
i. Guest long-distance telephone costs
j. Kitchen employee wages
k. Laundering towels and sheets
l. Lobby furniture
m. Maid wages
n. Mini-bar supplies
o. New carpeting
p. Painting lobby
q. Pay-per-view movie rental costs (in rooms)
r. Salary of the hotel manager
s. Soaps and shampoos for rooms
t. Training for hotel restaurant servers
u. Utility costs for hotel
v. Valet parking services
w. Wages of convention setup employees

Answer 1

1. Cost object is used to describe something to which costs are measured.
Hotel Guest is the most logical definition for the final cost object because the guest is the final consumer of services i.e. cost object such as a stay in hotel's room, food, room service, telephone, laundry, etc.
2.
a. Indirect
b. Direct
c. Indirect
d. Direct
e. Direct
f. Direct
g. Indirect
h. Indirect
i. Direct
j. Indirect
k. Direct
l. Indirect
m. Indirect
n. Direct
o. Indirect
p. Indirect
q. Direct
r. Indirect
s. Direct
t. Indirect
u. Indirect
v. Direct
w. Indirect