Direct and Indirect Cost

Topics: Costs, Cost, Variable cost Pages: 6 (1266 words) Published: August 15, 2008
1) Direct and indirect cost
Direct cost- We can easy compare direct to fixed cost. They are very similar. Direct cost we can name this cost which are directly attributable to the sale of a product. Direct costs can be identified specifically with a particular sponsored project, or that can be directly assigned to such activity relatively easily with a high degree of accuracy.It is necessarily to good understand that cost shared expenditures are considered to be direct costs. We have 3 types of direct cost:

direct materials
-materials and equipment purchased directly for use on specific contract •direct expenses
-cost of the computing equipments.
direct labour
-wages or salaries (inc. vacations, holidays, sick pay)
-travel of direct labour (employees)
-cost of the consultant services.
The sum of all 3 types of direct costs we called Prime cost . To easy show you what is a direct cost we can say that it is a cost of all needed materials and goods to sell a product. In conclusion we are Computing Store so in our case example of direct cost for us might be delivery person, service support, tills wages for staff witch have a contact with selling products, stores equipments.

Indirect cost
Indirect cost are all other costs that can’t be directly attributable to the final product or service. That includes •indirect materials
-Factory supplies
-Small items of material
Indirect labour
-cleaning staff
-security staff
Factory overheads

2) Fixed cost and variable cost

Fixed costs - the expenditures which our company has to be independently from the size of the production . Even then, when one nothing not produces in company, they are expenditures like rents , percentages from loans , the costs of preservation, guards and administrative services pays, workers salaries. You should independently pay Fixed costs from the size of the production, and now without regard on this or oneself he produces if not. Solid costs make up these costs which do not react on the changes of the size of the production because they depend on the example from the outflow of the time and without the regard on the quantity produced in the given period products the most often pays of the workers of administration and the management of the individual, heating and lighting energy stay on the unchanged level.

An examples of fixed cost:
Rent of shop
Interest on debt
business licence.
salary of permanent full-time workers

Variable costs are this expenditures our company connected with the expenditure of the work directly. Their level depends on the sizes of the production directly. So now they carry out zero when produce nothing, and grow together with increasing the sizes of the production. Direct costs (materials, goods, agency staff) are dependent costs from the changes of the size of the production together with with some department costs of the movement, on example: energy or fuel on technological and driving aims.

The changing cost hugs now these all kinds of expenditures in the enterprise, which they do not come in the composition of costs fixed .

An example of variable cost
additional agency staff
bags which we giving with computers.

Semi variable cost is the cost which contains both the feature fixed cost , how and the feature variable cost. The settled element of the cost will be the part of the cost which has the without to be paid of the regard on the level of the activity reached. The changing component part of the cost is paid proportional to the level of the activity from second side.

In our company for example is a phone bills. We pay the line fee included 500 minutes free, but if we keep ringing we have 800 to 1200 minutes monthly we need to pay more. The price, which depends from as a lot of, he uses the services.

3) Allocated cost

To allocated cost we can...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Direct and Indirect Cost with Managerial Accounting Essay
  • Essay about Direct and Indirect
  • Direct & Indirect Cost in Retail Essay Example
  • Indirect Costs Essay
  • Essay about Costs and Direct Labor Cost
  • Costs and Direct Labor Essay
  • Costs and Direct Cost Essay
  • Direct and Indirect Discrimination Essay

Become a StudyMode Member

Sign Up - It's Free