Question

Explain Direct Cost And Indirect Cost?

Answer 1

Answer:

Direct costs can be defined as costs which can be accurately traced to a cost object with little effort. Cost object may be a product, a department, a project, etc. Direct costs typically benefit a single cost object therefore the classification of any cost either as direct or indirect is done by taking the cost object into perspective. A particular cost may be direct cost for one cost object but indirect cost for another cost object.

Examples: Cost of gravel, sand, cement and wages incurred on production of concrete.

indirect cost:

Costs which cannot be accurately attributed to specific cost objects are called indirect costs. These typically benefit multiple cost objects and it is impracticable to accurately trace them to individual products, activities or departments etc.

Examples: Cost of depreciation, insurance, power, salaries of supervisors incurred in a concrete plant.

Explanation: