Difference Between Direct Cost And Indirect Cost
The main dissimilarities or difference between direct and indirect cost can be highlighted as follows:
1. Meaning
Direct Cost: Types of expenses that are directly attributed or allocated to a particular product or object in a production process.
Indirect Cost: Expenses that are not directly attributed or allocated to a particular product or object in a production process.
2. Economically Feasible
Direct Cost: Yes, it is economically feasible to trace direct costs.
Indirect Cost: No, it is not economically feasible to trace indirect costs.
3. Termed As
Direct Cost: They can be termed as variable costs also
Indirect Cost: They can be termed as fixed costs also
4. Attributable
Direct Cost: Can be attributed easily
Indirect Cost: Cannot be attributed
5. Cost Per Unit
Direct Cost: Cost per unit can be determined easily
Indirect Cost: Cost per unit cannot be determined
6. Total Cost
Direct Cost: Sum total of direct costs is known as prime cost
Indirect Cost: Sum total of indirect costs is overheads
7. Variability
Direct Cost: It is variable in nature and varies as per the change in output of the product
Indirect Cost: It is less variable than direct cost
Also Read:
Also Read:
8. Expended On
Direct Cost: It is expended on a particular product or object
Indirect Cost: It is expended on multiple objects or projects
9. Examples
Direct Cost: Material costs, labor costs, transportation etc are some examples of direct costs.
Indirect Cost: Indirect overheads, administrative expenses, rent, insurance etc. are some examples of indirect costs.
Direct Cost Vs Indirect Cost (Comparison Chart)
I hope this post is helpful to understand the difference between direct cost and indirect cost and to make comparison between them.
Basis For Difference
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Direct Cost
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Indirect Cost
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Introduction
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Costs that are directly allocated to a particular product or project
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Costs that are not directly attributed to a particular product or objects
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Feasible To Trace ?
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Yes
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No
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Known As
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Variable cost
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Fixed Cost
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Attributable
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Yes
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No
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Cost Per Unit
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Can be determined
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Cannot be determined
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Total Cost Is Called
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Prime cost
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Overheads
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Variability
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More
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Less
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Expended On
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Particular product
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Multiple products
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Examples
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Material cost, labor cost, transportation etc
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Insurance, rent, indirect overheads etc.
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I hope this post is helpful to understand the difference between direct cost and indirect cost and to make comparison between them.
