What is a Direct Cost vs. Indirect Cost?

which one of the following is not a direct material? This is a topic that many people are looking for. star-trek-voyager.net is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, star-trek-voyager.net would like to introduce to you What is a Direct Cost vs. Indirect Cost?. Following along are instructions in the video below:

“There students so in this video today. I m going to go over direct versus versus indirect costs. That s what are we talking about it s important that you these terms those first chapter. Our first and second chapter are mainly about terms because i need to lay the foundation for you for the rest of this class you have to understand how these terms works and don t worry we re going to practice a lot of test questions with this and a little bit first i want to introduce you do a few things so direct costs.

What is that well direct costs can easily be traced to a product let me show you so here s a cool example. We re going to use a car. So what are some direct costs that you can easily trace to a car. What can you recognize there.

Let s think about it so an engine that s easy right you open the cars hood there s an engine that s a direct material. That s what they call that and we ll go over that in a little bit..

But that is easily traced or directly traced to that car now. What else can be easily traced. Well. We have assembly time right so.

Some dudes are working in a factory and they re assembling that car so that can be easily traced to that car you re like well that guy right there worked on this car right easy. I just traced him that cost to the car or that steering wheel it goes in that car you can easily trace it so that s called a direct cost you can directly trace. It now let s talk about something else here. What are indirect costs so we talked about direct.

But what s an indirect cost well these costs have to be allocated to that product. So imagine the collar again..

It s not as easy to trace as like a steering wheel or an engine or assembly. Time these are more difficult costs so they don t call. It tracing they call it allocation allocated to the car. Now we have like power tools right because you have a power tool.

But you were on a lot of different cars with that tool. So it s really tough to directly trace a tool to that car now. What else electricity right you have electricity that powers that entire automobile plant can you really trace each little piece of electricity to each car. Not really it d be really tough to do so you have to allocate.

It now don t worry about actually the method of allocation right now i ll show you that later on. But all you need to know right now is that there are certain costs that you can trace to the car and certain costs that you have to allocate let me go back..

One. More time. Here. So again.

Indirect costs aren t allocated. Direct costs are traced. That s you have to know from this write that down all right that s about it for this video. Very short video.

I just wanted to show you the basic differences between direct costs and indirect once again direct costs you can trace think about a car you got the steering wheel the engine. The wheels..

The assembly time the dude that worked on that car then you have indirect costs with that car you got some power tools electricity. Maybe. The janitor right he s working and he s cleaning. That factory.

He s also an indirect costs now there s a lot of different types of indirect and direct costs. But don t worry we ll practice that in some test questions will be going through some really cool matching exercises that ll show you more about different types of costs and matching them with direct or indirect. So hopefully. This was helpful for you all it s a great example thanks for watching i ll see you in the next video.

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