Question

Problem 1-20 Variable and Fixed Costs; Subtleties of Direct and Indirect Costs [LO1-1, LO1-4] Madison Seniors Care Center is a nonprofit organization that provides a variety of health services to the elderly. The center is organized into a number of departments, one of which is the Meals-On-Wheels program that delivers hot meals to seniors in their homes on a daily basis. Required: A number of costs of the center and the Meals-On-Wheels program are listed below. For each cost listed below, indicate whether it is a direct or indirect cost of the Meals-On-Wheels program, whether it is a direct or indirect cost of particular seniors served by the program, and whether it is variable or fixed with respect to the number of seniors served.

Answer 1

Answer:

a. leasing the MOW van

• direct cost to Meals-On-Wheels program
• indirect cost to particular seniors served by the program
• fixed cost with respect to the number of seniors served

b. incidental supplies such as salt, pepper, napkins, and so on  

• direct cost to Meals-On-Wheels program
• direct cost to particular seniors served by the program
• variable cost with respect to the number of seniors served

c. gasoline consumed by the MOW van  

• direct cost to Meals-On-Wheels program
• indirect cost to particular seniors served by the program
• variable cost with respect to the number of seniors served

d. rent on the facility that houses Care Center, including the MOW

• indirect cost to Meals-On-Wheels program
• indirect cost to particular seniors served by the program
• fixed cost with respect to the number of seniors served

e. salary of the part-time manager of the MOW

• direct cost to Meals-On-Wheels program
• indirect cost to particular seniors served by the program
• fixed cost with respect to the number of seniors served

f. depreciation on the kitchen equipment used in the MOW  

• direct cost to Meals-On-Wheels program
• indirect cost to particular seniors served by the program
• fixed cost with respect to the number of seniors served

g. hourly wages of the caregiver who drives the van and delivers the meals

• direct cost to Meals-On-Wheels program
• indirect cost to particular seniors served by the program
• variable cost with respect to the number of seniors served

h. complying with H&S regulations in the kitchen  

• direct cost to Meals-On-Wheels program
• indirect cost to particular seniors served by the program
• fixed cost with respect to the number of seniors served

i. mailing letters soliciting donations to the MOW

• direct cost to Meals-On-Wheels program
• indirect cost to particular seniors served by the program
• fixed cost with respect to the number of seniors served