"Indirect expense"

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hi, i'm new to this forum.....i am on a question where it asking me...

'whether we can identify each and every indirect expense with the 3 services we provide'

i don't know how 2 answer this question, if anyone can HELP!!! Going Mad!

Thanx

H3M2 :roll:

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:"Indirect expense"

    I need to know this too! I've scoured the tutorial book and can't find anything about it! Needed it for tonight really.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:"Indirect expense"

    Hi Guys,

    I think indirect costs are any costs that occur after your intitial outlay of funds e.g.

    Puchase Machine - Initial Outlay

    Service and Repair of machine - Indirect Cost.

    -or-

    Send a Rep to do Advertising

    Wages of Rep - Initial Outlay

    Mileage Claim - Indirect Cost.


    I am pretty sure this is right,

    L : )
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:"Indirect expense"

    thanks lil-lora that really helped!

    :D
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:"Indirect expense"

    Hi Peeps,

    Indirect costs are costs whch are not directly linked to the product, ie Managment/admin/ where direct costs are those costs actually required to produce the product eg labour of the factory worker , material cost
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:"Indirect expense"

    Costs
    The firm incurs a variety of costs when it produces and we split these in various ways. One way is to split them into fixed costs and variable costs:

    Fixed costs - these are costs that do not vary as the level of production varies. These include such things as rent, business rates and security costs.
    Variable costs - these are costs that do vary as output varies and so will include things like raw materials, labour costs, energy costs and so on.
    Another very similar way to split costs is into direct costs and indirect costs:

    Direct costs - these are similar to variable costs, and are costs that can be directly attributed to the production of each unit of the good. This will therefore be things like the cost of the raw materials, the packaging, the labour time that went into the production (if that can be clearly identified) and so on.
    Indirect costs - these are more commonly known in practice as overheads, and are general costs that are not specifically related to the product. They may be things like marketing and distribution costs, the cost of secretarial staff, the cost of the premises (rent and so on) and general bills like phone bills.

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