Question

Jan Holliday Dance Studios is a chain of 45 wholly owned dance studios that offer private lessons in ballroom dancing. The studios are located in various cities throughout the southern and southeastern states. Holliday offers a set of 12 private lessons; students may pay for the lessons one at a time, but each student is required to enroll for at least a 12-lesson plan. The 20-, 40-, and 100-lesson plans offer savings. Each dance instructor is paid a small salary plus a commission based on the number of dance lessons provided.

Required:
Indicate whether the cost should be classified as (a) direct, (b) indirect, (c) variable, and (d) fixed with respect to the following list for the cost objects.

1. Each dancing instructor’s salary
2. Manager’s salary
3. Music tapes used in instruction
4. Utilities for the studio
5. Part-time studio receptionist
6. Planning and development materials sent from the home office
7. Free lessons given by each studio as a promotion
8. Regional TV and radio advertisements placed several times a year

Answer 1

For Studios as the Cost object:

1. Each dancing instructor’s salary - Direct Cost , Variable Cost

2. Manager’s salary - Direct Cost , Variable Cost

3. Music tapes used in instruction - Direct Cost , Variable Cost

4. Utilities for the studio - Direct Cost , Variable Cost

5. Part-time studio receptionist - Direct Cost , Variable Cost

6. Planning and development materials sent from the home office - Indirect Cost , Variable Cost

7. Free lessons given by each studio as a promotion - Direct Cost , Variable Cost

8. Regional TV and radio advertisements placed several times a year - Direct Cost , Fixed Cost

For Lessons as the Cost object:

1. Each dancing instructor’s salary - Direct Cost , Fixed Cost

2. Manager’s salary - Indirect Cost , Fixed Cost

3. Music tapes used in instruction - Indirect Cost , Fixed Cost

4. Utilities for the studio - Indirect Cost , Fixed Cost

5. Part-time studio receptionist - Indirect Cost , Fixed Cost

6. Planning and development materials sent from the home office - Indirect Cost , Fixed Cost

7. Free lessons given by each studio as a promotion - Indirect Cost , Fixed Cost

8. Regional TV and radio advertisements placed several times a year - Indirect Cost , Fixed Cost

Step-by-step explanation:

There are two possibilities of the cost object :

1. Studios as the Cost object

2. Lessons as the Cost object

Now,

For Studios as the Cost object:

1. Each dancing instructor’s salary - Direct Cost , Variable Cost

2. Manager’s salary - Direct Cost , Variable Cost

3. Music tapes used in instruction - Direct Cost , Variable Cost

4. Utilities for the studio - Direct Cost , Variable Cost

5. Part-time studio receptionist - Direct Cost , Variable Cost

6. Planning and development materials sent from the home office - Indirect Cost , Variable Cost

7. Free lessons given by each studio as a promotion - Direct Cost , Variable Cost

8. Regional TV and radio advertisements placed several times a year - Direct Cost , Fixed Cost

Now,

For Lessons as the Cost object:

1. Each dancing instructor’s salary - Direct Cost , Fixed Cost

2. Manager’s salary - Indirect Cost , Fixed Cost

3. Music tapes used in instruction - Indirect Cost , Fixed Cost

4. Utilities for the studio - Indirect Cost , Fixed Cost

5. Part-time studio receptionist - Indirect Cost , Fixed Cost

6. Planning and development materials sent from the home office - Indirect Cost , Fixed Cost

7. Free lessons given by each studio as a promotion - Indirect Cost , Fixed Cost

8. Regional TV and radio advertisements placed several times a year - Indirect Cost , Fixed Cost