Depreciation can be either a direct cost or an indirect cost, or it can be both direct and indirect.
Let's illustrate this with the depreciation of a machine used in Department 23 of a manufacturer. The depreciation on that machine is a direct cost for Department 23. It is direct because it is traceable to Department 23 without any allocation.
The depreciation of this same machine will be an indirect cost of the products manufactured with that machine. It is indirect because the depreciation is allocated to the products. Perhaps the machine in Department 23 has depreciation of $50,000 per year (cost of machine of $500,000 divided by 10 years of useful life). The $50,000 of annual depreciation is then assigned or allocated to products based on the number of hours that products use the machine. For example, if the manufacture expects 20,000 machine hours of use in the current year, then it assigns or allocates $2.50 ($50,000/20,000) per machine hour to each product using the machine. If Product #189 requires one hour of this machine's time, Product #189 will have $2.50 as part of its indirect costs. Indirect manufacturing costs are also referred to as manufacturing overhead, factory overhead, or burden.
Only depreciation for all those fixed assets which directly involve in manufacturing of production volume is part of direct cost while all other depreciation is not part of direct cost and included in indirect cost classification.
Direct cost are those costs which varies directly with variation in volume of products units like direct labor or direct material while indirect cost has not direct connection with volume of units of products like depreciation building rent supervisors salary etc.
that is the order of manufacturing account Direct materials + Direct wages + Direct expenses (like loyalty fees) = prime cost Production overheads = indirect wages, depreciation Non Production overheads = like Work in progress
direct cost has direct relation with product manufacturing while indirect cost not and not identifiable with cost as well.
The Answer is NO. Direct costs are direct cost which can be clearly/economicaly identified with the cost object, indirect costs cannot be traced to a specific cost object, based on the definition direct cos cant be an indirect cost (Misdhaaque Ahmed)
Depreciation is an indirect cost as there is no separate identification in product cost that which cost is depreciation as deprecation is a overhead cost that’s why it is indirect cost.
Only depreciation for all those fixed assets which directly involve in manufacturing of production volume is part of direct cost while all other depreciation is not part of direct cost and included in indirect cost classification.
Direct cost are those costs which varies directly with variation in volume of products units like direct labor or direct material while indirect cost has not direct connection with volume of units of products like depreciation building rent supervisors salary etc.
that is the order of manufacturing account Direct materials + Direct wages + Direct expenses (like loyalty fees) = prime cost Production overheads = indirect wages, depreciation Non Production overheads = like Work in progress
direct cost has direct relation with product manufacturing while indirect cost not and not identifiable with cost as well.
The Answer is NO. Direct costs are direct cost which can be clearly/economicaly identified with the cost object, indirect costs cannot be traced to a specific cost object, based on the definition direct cos cant be an indirect cost (Misdhaaque Ahmed)
Prime cost = direct materials + direct laborwhile conversion cost = direct labor + factory overhead( which includes indirect materials, indirect labor and other indirect costs
indirect
what are the differences between direct cost and indirect cost in financial accounting
yes cost function measures the direct costs along with indirect cost.
No direct costs and indirect costs are not same and opposite of each other.
Define direct and indirect labour?"