Jones Company produces a product that has a variable cost of $27 per unit and a sales price of $59 per unit. The company’s annual fixed costs total $720,000. It had net income of $280,000 in the previous year. In an effort to increase the company’s market share, management is considering lowering the selling price to $52 per unit.
Required:
a. Identify each cost as being a direct or indirect cost assuming the cost objects are the individual products (houses or projects).
b. Identify each cost as being a direct or indirect cost, assuming the cost objects are the two divisions.
c. Identify each cost as being a direct or indirect cost assuming the cost object is Tapper Construction Company as a whole.