Sturbridge Company manufactures fine furniture and grandfather clocks. Sturbridge has an excellent reputation, and each grandfather clock sells for several thousand dollars. Which of the following is an indirect cost, assuming the cost object is the Clock Department?
A) Salary of the clock production supervisor
B) Depreciation on the factory building
C) Depreciation on clock-making equipment
D) All of these answers are correct.

Question

Quizplus · Accepted Answer

Depreciation on the factory building is an indirect cost since it cannot be traced directly to the Clock Department. The salary of the clock production supervisor could potentially be a direct cost if he or she only manages the Clock Department, and depreciation on clock-making equipment could also be a direct cost if it is only used for clock production. However, the question specifically asks which cost is indirect assuming the cost object is the Clock Department, and in that context, only the depreciation on the factory building fits the definition of an indirect cost.

Sturbridge Company Manufactures Fine Furniture and Grandfather Clocks