Direct and Indirect Expenses

In every industry there are several other expenditures, such as cost of advertisement, building rent, depreciation charges of plant and factory building, cost of packing, cost of transportation, salaries and commission to salesmen etc. All these expenditures are known as expenses. So, we can say that except direct material and direct labor cost, all other expenses, which are incurred in the factory are known as expenses.

The cost of indirect material and indirect labor is also included in the expenses.

Expenses may be of 2 classes,

1. Direct or chargeable expenses
2. Indirect expenses

Direct Expenses

These are those expenses, which can be charged directly to a particular job and incurred for that specific job only. For example, cost of special jigs and fixtures, cost of some special patterns and cost of experimental work on a particular job etc.


    


Indirect Expenses

These are also known as overhead charges, on cost, burden or indirect charges. These can be further classified as:

a. Factory expenses
b. Administrative expenses
c. Selling expenses
d. Distribution expenses

Factory Expenses

These overheads include all the expenditures made on the actual operation of the product in the plant, such as indirect materials and indirect labor. It is also named as works on cost.

Administrative Expenses

These overheads include all the expenditure made on the salaries of general office staff and executive staff, telegraph, fax, computer and telephone charges, depreciation of office building and equipment etc.

This is also known as establishment on-cost or office expenses.

Selling Expenses

These overheads include all the expenditure made on the salaries of persons working in sales department, advertising expenses and agency expenses etc.

These overheads include all the expenses made on holding finished stock, dispatching them to the customer and packing cost etc.

Distribution Expenses

These overheads include all the expenses made on holding finished stock, despatching them to the customer and packing cost etc.




Next Chapters

Estimating Procedure
Costing
Difference between Estimating & Costing
Depreciation & Obsolescence
Material Cost Calculation
Calculating Labor Cost
Direct and Indirect Expenses
Component Cost
Machine Shop Estimating
Forging and Forging Types
Starting an Organization
Welding Cost Estimation
Jigs and Fixtures
Forecasting
Qualities of an Entrepreneur
Starting Small Scale Industries
Budget and Budgetary Control
Supply & Law of Supply
Exchange and Barter Exchange
Classification of Market
Money and Types of Money
Trade Cycle
Break Even Analysis
Financial Management
Profit
Pricing
 


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