What is the difference between Direct expenses and Indirect
expenses?
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Answer / pankaj kumar singh
is the trade license expenses is direct expenses or in
direct expenses
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Expenses Which are connected to purchase of goods or Service
are known as "Direct Expenses"
For example, freight, insurance, of goods in transit,
carriage, wages, custom duty, import duty, octroi duty etc.
Without incurring these expenses, it is not possible to
bring the goods from the purchase point to the godown of the
business. such expenses are collectively known as direct
expenses.
Where as Indirect Expenses,
All expenses other than direct expenses are assumed as
indirect expenses. Such expenses have no relationship with
purchase of goods. Examples of indirect expenses include
rent of building, salaries to employees, legal charges,
insurance of building, depreciation, printing charges etc
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Answer / sunil ranjan samantaray
Direct expenditures are those which are mostly incurred within the factory or industry and it is much more essential for a company than indirect expenditure. Because it shows a complete picture of operation of a business unit. Most of the investors keep their eyes on operating profit or gross profit than net profit. Because the expenditure incurred under direct expenditure is most essential , if a company will be able to make control on direct expenditure then company can easily handle their operating expenses. It reflects the operational performance of the company. Examples of Direct expenditure are wages,purchases of raw material,octroi,coal,gas,water etc. Examples of Indirect expenditure are rent,taxes,depreciation,salary etc.
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For the production of 10,000 units the following are the budgeting expenses: Per Unit Rs. Direct materials 60 Direct labour 30 Variable overhead 25 Fixed overhead (Rs.1,50,000) 15 Selling expenses (10% fixed) 15 Variable expenses (direct) 5 Administrative expenses (Rs.50,000 fixed) 5 Distribution expenses (20% fixed) 5 Total cost of sales per unit 160 Prepare the flexible budget for the production of 6,000 , 7,000 ,and 8,000 units of production
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