1.

A. Define direct cost:

The expenses a business incurs directly to make a product or service, or buy a wholesale product

for resale (all other costs are indirect costs).

B. Name a possible cost driver for each cost object:

1. Rent:_____________________________________________________________

1. Transportation to move products: ______________________________________

1. Phone bill:_________________________________________________________

1. Electricity bill: ____________________________________________________

C. Give three examples of direct costs that would incur in a paper airplane manufacturing

department (what costs can be easily traced to this specific department?)

a.______________________________________________________________________

b.______________________________________________________________________

c.______________________________________________________________________

2. Mickey Enterprises has three department stores that have the following floor space:

Department 1

20,000 square feet

Department 2

30,000 square feet

Department 3

50,000 square feet

How much of the $2,000,000 store rent will be allocated to each department?