Assuming one Uber car ride in NYC is the cost object, what costs related to the
ID: 2331953 • Letter: A
Question
Assuming one Uber car ride in NYC is the cost object, what costs related to the Manhattan office would be direct to the car ride? What costs would be indirect?
Uber Technologies, Inc. (Uber) is a privately-held $66 billion ride-sharing company that has offices all over the world. Uber has over 8,000 employees, not counting the drivers who are categorized as independent contractors.
One of Uber’s offices is in Manhattan in New York City. The office is in an old freight warehouse and former nightclub, now called Chelsea Terminal Stores. Uber is on the third floor of the building, occupying 54,000 square feet.
The Manhattan office houses various Uber teams, including engineering, communications, IT, HR, business development and operations. Few individual offices exist at the Manhattan office; the layout is largely an open layout. Conference rooms are available when privacy is needed.
Employees at the Manhattan office receive several perks. Once a week, breakfast is served at an all-hands meeting. A gym including punching bags, ellipticals, treadmills and exercises bikes is in the building. Employees receive monthly Uber credit, which they can use to commute to work or for personal needs. A free catered lunch is provided every day. Kegs of beer, iced coffee, and wine are available at the office. Employees can participate in a regular office table tennis tournament.
Explanation / Answer
Direct cost -
Direct costs are costs which are directly accountable to a cost object. Some overhead costs which can be directly attributed to a project may also be classified as a direct cost.
In the case provided, "Employees receive monthly Uber credit, which they can use to commute to work or for personal needs." is a direct cost.
Uber credit provided are direct cost as it is directly attributable to the service. When a Uber credit is utilised by an employee, it will be directly identifiable against the ride.
On the other hand, all other expenses mentioned in the above case are indirect expense as they cannot be attributed to a specific ride. It will indirectly affect the cost as the overall cost will be absorbed. It cannot be tagged directly to the service.