Indirect Cost Indirect costs are costs that are used in a manufacturing process or service but cannot be easily traceable to the end product or service.
Some indirect costs can include:
Maintenance and repairs
Factory overhead is a type of indirect cost that includes all the costs of indirect labour and indirect materials used in the manufacture of a product.
Factory overhead = Indirect Materials + Indirect Labour
Direct costs are costs that are used in a manufacturing process or service and can easily be traceable to the end product or service. Some direct costs can include either direct materials or direct labour. Direct Materials:
Direct materials are only materials that are easily traceable to the manufacture of a product. E.g. Wood used in a table.
Direct Labour: Direct labour is the cost directly associated with the manufacture of a product. E.g. Production line worker's wages.