08-26-2009, 05:01 PM
Indirect costs are costs that are not directly accountable to a cost object (such as a particular function or product). Indirect costs may be either fixed or variable. Indirect costs include taxes, administration, personnel and security costs, and are also known as overhead.
Difference between Direct and Indirect Cost
Direct costs are those cost which can be directly identified as coming from a certain operation. In addition, direct cost usually represents a major cost of the company.
An example of direct cost in a manufacturing company is the cost of materials used and the cost of labor.
An example of indirect cost in a manufacturing company is the factory overhead.
For a merchandising company, direct cost would be the cost of goods sold.
For a service company, direct cost would be the cost of services.
where as indirect costs are not included in cost of goods sold or cost of goods services.
Difference between Direct and Indirect Cost
Direct costs are those cost which can be directly identified as coming from a certain operation. In addition, direct cost usually represents a major cost of the company.
An example of direct cost in a manufacturing company is the cost of materials used and the cost of labor.
An example of indirect cost in a manufacturing company is the factory overhead.
For a merchandising company, direct cost would be the cost of goods sold.
For a service company, direct cost would be the cost of services.
where as indirect costs are not included in cost of goods sold or cost of goods services.
