Martin's is a store with three departments, Appliances, Tools, and Home Improvements. The company expects to incur the following indirect costs related to its operations:Store manager's salaryStore suppliesElectric billClerical staff salariesPayroll taxesOffice suppliesWater billSewer billMedical insuranceVacation payRequired:1) Organize the indirect costs into three cost pools: Store Administration, Utilities, and Fringe Benefit Costs, assuming that each department is a cost object2) Identify an appropriate cost driver for each cost pool.
What will be an ideal response?
Answers will vary
1) Cost Pools
Store Administration: store manager's salary, store supplies, clerical staff salaries, office supplies
Utilities: Water bill, electric bill, sewer bill
Fringe Benefit Costs: Payroll taxes, medical insurance, vacation pay
2) Cost Drivers
Store Administration: dollar amount of sales or square feet occupied by each department
Utilities: square feet occupied by each department
Fringe Benefit Costs: number of employees
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