ECONOMICS

Detailed explanation-1: -The cost of electricity is an indirect cost since it can’t be tied back to the product or the specific machine. However, the cost of electricity is a variable cost since electricity usage increases with the number of products that are produced or manufactured.

Detailed explanation-2: -Indirect costs include costs which are frequently referred to as overhead expenses (for example, rent and utilities) and general and administrative expenses (for example, officers’ salaries, accounting department costs and personnel department costs).

Detailed explanation-3: -What are indirect costs? Indirect costs represent the expenses of doing business that are not readily identified with a particular grant, contract, project function or activity, but are necessary for the general operation of the organization and the conduct of activities it performs.

Detailed explanation-4: -Examples of indirect costs are accounting and legal expenses, administrative salaries, office expenses, rent, security expenses, telephone expenses, and utilities.

Detailed explanation-5: -Indirect costs include supplies, utilities, office equipment rental, desktop computers and cell phones. Much like direct costs, indirect costs can be fixed or variable. Fixed indirect costs include expenses such as rent; variable indirect costs include fluctuating expenses such as electricity and gas.