Question

Which definition best describes indirect costs?

Options

• Indirect costs are those costs which are not controlled directly by a manager.

• Indirect costs are those costs which cannot be directly associated with a product or service.

• Indirect costs are always fixed.

• Indirect costs are always manufacturing overhead cost.

Answer 1

Indirect costs are those costs which cannot be directly associated with a product or service.

Explanation:

Indirect costs cannot be directly associated with a specific product or service; they are incurred for the organisation as a whole (e.g., rent, supervisory salaries) and are allocated across products rather than charged directly.