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Direct costs: |
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Those costs that are traced to a specific cost objective like product/service.
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Indirect costs: |
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Those costs that CANNOT be directly traceable to a particular cost objective and incurred for multiple cost objectives. Can also be called Common Cost. |
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Salient Point: |
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Direct costs are ALLOCATED to a specific cost objective but Indirect costs or common costs are assigned to multiple cost objective BY APPORTIONMENT. For example : Rental for a premise occupied by several departments is being apportioned on the basis of the relative square meters used
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