Question

In your workplace, give a good example of a direct cost and indirect cost?

Answer 1

Direct costs are the ones which are directly related to the goods manufactured or service provided by the entity for ex: raw materials, direct labour etc.

Indirect costs are those which are not directly related to the item produced or service provided but are need to carry on the business, ex: rent, depreciation expense, utility expenses.

If the work place is a gas station,

Direct costs will be purchase of gas from the fuel companies.

Indirect costs will be rent of the gas station, salaries of staion managers, utility expenses.