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direct cost vs indirect cost-difference between direct cost and indirect cost

As we know cost is money spent, a sacrifice or a value foregone to achieve an economical benefit. There are various types of cost. This page compares direct cost vs indirect cost and mentions difference between direct cost and indirect cost.

Direct cost

The direct cost type are those costs which have following features:

➨Allocable costs those are directly attributed to the project activity.

➨These costs produce WBS deliverables e.g. cost of material directly consumed to produce product, salary of staff associated in producing project deliverables.

➨Allowable costs those can be directly associated with the project e.g. salary of project management team, travel cost, postal charges, telephone charges etc.

Indirect cost

The Indirect cost type are those costs which have following features:

➨These costs cannot be directly attributed to the product being produced.

➨It includes following:
• cost of facilities • administration related costs • cost of supervision • cost of functional departments • cost of marketing and selling • routine postage • printing • books • subscription • computers • general office supplies etc.

➨Generally these costs are charged from the customer on the basis of percentage to direct cost.

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