Difference Between Direct Cost And Indirect Cost

When discussing the essential difference between direct and indirect cost the main difference is that only direct cost can be easily traced to specific cost objects. Furthermore, direct cost are cost that can be easily traced to a cost object in a cost effective manner and with little effort. However, indirect cost cannot be easily traced to a cost object in a cost effective manner (Edmonds, Tsay, & Olds, 2011). Therefore, a cost object is something for which a cost is made up of such as a product or service.

It is somewhat quite straightforward to categorize the basic difference between direct and indirect costs. Essentially important, direct costs are cost that are directly associated with the production of a product or service, while

To give other qualifying examples of direct costs say that for instance in order for an appliance maker to create its product, they would be in need of steel, electronic elements, and other resources. In addition to the examples given other examples of direct costs could include the salary of a supervisor for a month who has only supervised the construction of a single building is a direct fixed cost incurred on the building. Moreover, generally, direct costs are limited to only the actual costs of construction such as craft labor, material, equipment, and subcontracts. These costs are often referred to as hard costs and are necessary to the installed or constructed component (Norfleet,

Indirect costs are essentially the costs left over after direct costs have been determined. and are sometimes referred to as the "real" costs of doing business. According to Ledford (2014, p. 327) states that, “Indirect costs often called facilities-and administrative costs are expenses that are not directly associated with any one research project. This includes libraries, electricity, administrative expenses, facilities maintenance and building and equipment depreciation, among other