Cost on the Basis of Nature
Direct costs are expenses that a company can easily connect to a specific “cost object,” which may be a product, department or project. It includes direct material (raw material), direct labour (wages) and direct expenses (octori, carriage , freight etc).
Indirect costs go beyond the costs associated with creating a particular product to include the price of maintaining the entire company. These overhead costs are the ones left over after direct costs have been computed, and are sometimes referred to as the “real” costs of doing business.
It includes indirect material rather than raw material, indirect labour expenses (salaries) and indirect expenses (excise duty, income tax etc.)
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