Commercial Applications
It refers to the expenses incurred on those items which are not directly chargeable to production. Salaries of timekeeper, foremen and watchmen are examples of this cost. This cost is incurred for the concern as a whole rather than a particular product.
- Direct cost
- Indirect cost
- Selling cost
- Advertising cost
Cost
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Answer
Indirect cost
Reason — Indirect costs (also called overheads or common costs) are expenses incurred for the organisation as a whole, which cannot be directly charged to a particular product. Salaries of timekeepers, foremen, watchmen, storekeepers, etc., are typical examples of indirect labour cost — they support the production process but cannot be wholly identified with any specific product. Selling and advertising costs are specific subsets used in selling the product, not the general descriptor sought here.
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Related Questions
What describes variable costs in terms of cost behaviour?
(1) They stay constant regardless of changes in activity. (2) They change proportionally with changes in activity levels. (3) They include both direct and indirect components. (4) They are fixed in nature.
- 1 & 2
- 3 & 4
- Only 1
- 2 & 3
Assertion (A): Opportunity costs are relevant in business decision making.
Reason (R): Opportunity cost reflects the value of the next best alternative foregone when a decision is made.
- A is true but R is false
- A is false but R is true
- Both A and R are true and R explains A.
- Both A and R are true but R does not explain A.
Which definition best describes indirect costs?
- Indirect costs are those costs which are not controlled directly by a manager.
- Indirect costs are those costs which cannot be directly associated with a product or service.
- Indirect costs are always fixed.
- Indirect costs are always manufacturing overhead cost.
To control costs, it is essential to keep control on:
- Prime cost
- Overheads
- Indirect materials and tools cost
- All of these