Venture Buses operates throughout the south-eastern suburbs of Melbourne, with its depot located in Cheltenham. Every day, fuel is delivered and stored in tanks located in the depot. This fuel is used by all the buses and administration vehicles. The accountant has been requested to develop a system to assign the cost to the different vehicles in the depot. He has asked your assistance in coming up with a way to identify the fuel costs.

Required

(a) From the perspective of the depot, is the cost of fuel a direct or indirect cost?

(b) From the perspective of the vehicles attached to the depot, can the cost be classified as either direct or indirect? Briefly explain.

(c) What system would be required to have the cost classified as direct?

(d) If the accountant decided to go with an indirect cost classification, how could the cost be allocated?

(e) Identify some factors that would determine which method would be the best for the assignment of fuel costs to the vehicles.