May 2009
Beginner to intermediate
272 pages
8h 44m
English
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CHAPTER 8
Analysis of Indirect Costs
Unlike direct costs, indirect costs cannot be conveniently or readily identified with one product or service. They are identified with multiple products or cost objectives. Therefore, they must be allocated to (or divided among) several cost objectives in a fair and equitable manner.
Every business has indirect costs; they are the firm’s general operating expenses and are as much a cost of doing business as the cost of labor and material. The firm must recover indirect costs as well as direct costs to break even. Presumably, the price for each contract includes a full allocation of its own direct labor and material costs. The indirect costs are another matter. The firm collects its indirect costs into logical ...
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