Question

What are the assumptions behind the calculations of direct, indirect, tangible and intangible costs? Direct costs probably require the least amount of discussion and documentation so focus more on indirect/intangible costs. How important are intangible and indirect costs with respect to employee turnover costs?

Answer 1

Answers : -

1. The assumptions behind the calculations of direct, indirect, tangible and intangible costs are that the direct cost has to be directly related to the production of the goods or services and indirect cost has to be manufacturing cost. The direct cost assumption are related to the labour hour, labour efficiency, raw materials and indirect costs assumptions are related to the office and administration expenses.

Tangible cost are cost related to a subject or cost incurred to replace a employee to new employee and intangible cost are losses in productivity, Goodwill. Assumptions of tangible cost are employee turnover, assumption on assets such as equipment and intangible assumptions are productivity or customer goodwill.

2. Intangible and indirect cost are as important as direct and tangible cost as these cost are indirectly related to the company's revenues. Without these cost the company will not work. These cost are mandatory to occur for production of goods or for the productivity of the employees.