Direct and Indirect Costs
Direct Cost
can be directly accountable to a cost object. refer to materials, labor and expenses related to the production of a product.irectly accountable to a cost object
**Indirect/Direct
may be both a direct cost of one cost object and an indirect cost of another cost object. it all depends on the choice of the cost object.
Available Information-Gathering Technology
Make it possible to consider more and more costs as direct costs.
The Materiality of Cost in Question
The smaller the amount of a cost (the more immaterial the cost is) the less likely it is economically feasible to trace it to a particular cost object.
Indirect Cost
are costs that are not directly accountable to a cost object (such as a particular project, facility, function or product). Indirect costs may be either fixed or variable. Indirect costs include administration, personnel and security costs.
Design of Operations
Classifying a cost as direct is easier if a company's facility is used exclusively for a specific cost object, such as a specific product or a particular customer