Question

Draw a distinction between direct and indirect cost?

Answer 1

Answer- A direct cost is directly associates with a product and can be traced to specific cost objects. The example of direct costs are direct material, direct labor, factory overhead. Direct costs are always a variable costs.

Indirect costs are not directly associated with a specific cost objects. The example of indirect costs are as follows- Power consumption, Supervisor’s salaries, Factory depreciation, Factory manager’s salary etc. Indirect costs are likely to be a fixed cost or period cost.