27th Edition
WARREN + 5 others
ISBN: 9781337272094




27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Cost classifications for a service company

A partial list of The Grand Hotel’s costs follows:

a. Cost to mail a customer survey

b. Wages of convention setup employees

c. Pay-per-view movie rental costs (in rooms)

d. Cost of food

e. Cost of room mini-bar supplies

f. Training for hotel restaurant servers

g. Cost to paint lobby

h. Cost of laundering towels and bedding

i. Champagne for guests

j. Salary of the hotel manager

k. Depreciation of the hotel

l. Cost of valet parking

m. Wages of bellhops

n. Cost to replace lobby furniture

o. Cost of advertising in local newspaper

p. Wages of desk clerks

q. Wages of maids

r. Cost of new carpeting

s. Guest room telephone costs for long-distance calls

t. Cost of soaps and shampoos for rooms

u. Utility cost

v. Wages of kitchen employees

w. General maintenance supplies


1. What would be The Grand Hotel’s most logical definition for the final cost object? Explain.

2. Identify whether each of the costs is to be classified as direct or indirect. For purposes of classifying each cost as direct or indirect, use the hotel guest as the cost object.


To determine

Direct cost:

A cost indicates the payment of cash or the obligation to pay the cash in the future period for the generation of revenue or the service performed. A direct cost is the cost which is directly involved in the process of production. For example: The cost of plastic is the direct material for manufacturing a bottle.

Indirect cost:

An indirect cost is the cost which is indirectly involved in the process of production. For example: The salary of supervisor of a manufacturing business cannot be traced even though the supervisor contributes for the production.

Cost object:

A cost object is something to which costs are assigned, it is often a product lines or customers department for which costs are accumulated or measured by the management.

To explain: The most logical definition for the final cost object.


Here hotel guest is the most logical definition for the final cost object...


To determine

To classify: Each cost as either direct cost or indirect cost.

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