ECONOMICS

Detailed explanation-1: -How to Calculate Direct Cost-The Formula. Direct Materials + Direct Labor = Direct Cost. Indirect costs in manufacturing include factory equipment purchases, factory maintenance costs, and staff training expenses.

Detailed explanation-2: -In the budget, indirect costs are calculated by multiplying the sponsor’s overhead rate by the direct cost base.

Detailed explanation-3: -Examples of Direct Costs and Indirect Costs Examples of direct costs are direct labor, direct materials, commissions, piece rate wages, and manufacturing supplies. Examples of indirect costs are production supervision salaries, quality control costs, insurance, and depreciation.

Detailed explanation-4: -Direct costs are expenses that can be connected to a specific product, while indirect costs are expenses involved with maintaining and running a company. As a business owner, you will have a clearer understanding of how to set pricing if you can classify your costs correctly.