What are indirect expenses? Give an example.

Indirect expenses are those expenses which cannot be wholly and directly identified with a specific product, job or cost centre. They are incurred for the general operation, organisation and control of the business as a whole rather than for a specific product. Indirect expenses, together with indirect material and indirect labour, form the overheads of the organisation.

Indirect expenses are of three types:

1. Factory expenses — e.g., factory rent, power and fuel, depreciation of plant.
2. Office and administrative expenses — e.g., office rent, printing and stationery, audit fees.
3. Selling and distribution expenses — e.g., advertising, sales commission, packing charges.

Example: Factory rent — it is paid for the entire factory premises and cannot be charged directly to any single product made in the factory.