ECONOMICS

Detailed explanation-1: -Rent on a factory building is an indirect cost because it is a cost which has been incurred in order to keep the business running as a whole and, so it cannot be directly linked with the cost of a product or service and, hence it is an indirect cost.

Detailed explanation-2: -Indirect expenses are expenses other than direct expenses. These refer to those expenses which cannot be directly, conveniently and wholly allocated to cost centers or cost units. E.g. factory rent & insurance, power, general repairs etc.

Detailed explanation-3: -Expenses which are not directly connected with the manufacturing or trading activity are called as indirect expenses. These are essential expenses but does not have any direct connect with trading of the business. Examples are Rent, Rates & Taxes, Salaries.

Detailed explanation-4: -Factory Rent is a Direct Expense as it is related to factory, also it is a part of manufacturing expense and therefore, written on the. The expenses, incurred after manufacturing of goods are indirect expenses.

Detailed explanation-5: -Indirect factory costs are all costs incurred by a manufacturing operation, not including direct materials and direct labor. These costs are allocated to the units produced within the same period. If the units are not sold, then the allocated costs are included in ending inventory.