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