In the case of lawncare inc we already have

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Unformatted text preview: •••••••••••••••••• At this point, the cost per hour of service becomes somewhat more difficult to calculate, since it now relies on some further decisions. We will thus defer the per-unit calculations until those decisions have been discussed. Note, however, that our total costs have increased to $200,000 as a result of the additional $25,000 for the maintenance department. Decision #3. Distinguishing Between Direct and Indirect Costs A third decision inherent in a cost accounting system is the distinction between direct and indirect costs. Direct costs are those costs that are unambiguously associated with, or physically traceable to, a specific cost center. Indirect costs are those costs that apply to more than one cost center, and thus must be distributed among the cost centers that use them. Again, under the simplest of circumstances, where an organization produced one product in one cost center, there would be no indirect costs, since it would not be possible to have cos...
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