Question

“A direct cost of a specific cost object can be indirect cost of another cost object” – do you agree with this statement? Explain with an example.

Answer 1

This statement can be explained with the following example.

If we take maintenance department as a cost object, the wages of the maintenance employes will be direct costs for the cost object .

But the same wages of maintenance employees will be indirect costs if the cost object is a product.  

Same will be the case with sales salaries and advertising.They will be direct costs for the cost object " Sales Department", whereas for the cost object 'Product' they will be indirect costs.