Question

California Tires manufactures two types of​ tires, that it sells as wholesale products to various specialty retail auto supply stores. Each tire requires a​ three-step process. The first step is mixing. The mixing department combines some of the necessary direct materials to create the material mix that will become part of the tire. The second step includes the forming of each tire where the materials are layered to form the tire. This is an entirely automated process. The final step is​ finishing, which is an entirely manual process. The finishing department includes curing and quality control.

If the cost object were the​ ""mixing department"" rather than units of production of each kind of​ tire, which preceding costs would now be direct instead of indirect​ costs:

Answer 1

Raw materials, labor, and maintenance specific to the mixing department become direct costs if the department itself is the cost object, while costs for forming and finishing remain indirect.

Step-by-step explanation:

If the cost object is the mixing department rather than units of production of each kind of tire, the preceding costs that would now be direct instead of indirect include the raw materials used in the mixing process, the labor costs of employees working specifically within the mixing department, and any other costs that can be directly attributed to operations within that department such as maintenance costs for mixing equipment.

Costs for material and labor that are specific to the forming and finishing steps, however, would remain as indirect costs when considering the mixing department as the cost object. Change in the cost object from individual tires to the mixing department shifts the classification of certain costs; those that can be directly traced to the mixing department become direct costs to that department.