Question

Distinguish between direct costs, indirect costs and factory overhead. Explain each and how they differ. Include in your answer, how you may calculate them and include that calculation in the sales price for something.

Answer 1

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Distinguishing Cost & Factory Direct Cost Overhead Indisol Direct costs are inclused by entity while engaging in main business or core business activity. These costs includes labour costs, raw materials etc. - Indirect costs can not be directle attributable to the manufacture activity. These costs are incurred in ovezalé basis, fou postane rrent, salary to employees et la Factory Overheads incurred in production process. These costs are other than materials & Cabour. The factory overheads are aggregalod and distributed among units produced The factory overhead costs can be Variable or fixed costs. These cost may be direct cost or indirect costs

The major differences among there are identification of costs Direct costs are generalle variable & identified to product. The indirect cost are not specifically identified with produnte The factory ouesthead are & other costs that labour & material cused in product. Allocation in sale price toen 1) Direct costs! These can be directly added to the calulation of sale price as specifically identifiable. ) Indirect cost & fallory overhead For these, cost pool is created and allocated to the units produced. Certain factory overheads can be directly attributable which can be directly assigned to the product.