What are indirect costs?

Indirect costs are costs used by multiple activities, and which cannot therefore be assigned to specific products, services, geographical regions, customers, or other cost objects. Instead, indirect costs are needed to operate the business as a whole.

Indirect costs do not vary substantially within certain production volumes or other indicators of activities, and so are considered to be fixed costs.

Examples of indirect costs are:

• Accounting and legal expenses
• Administrative salaries
• Office expenses
• Rent
• Telephone expenses
• Utilities

Similar Terms

Indirect costs incurred in manufacturing operations are known as manufacturing overhead, while indirect costs incurred in the general and administrative area are known as administrative overhead.

Related Questions

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