What is Indirect Cost?

Indirect Cost:
The institute of Cost and Management Accountants (UK) defines indirect cost as the,
“Cost which cannot be allocated but which can be apportioned to or absorbed by cost
centres or cost units.” They are incurred for the benefit of more than one product,
activity or job and must be apportioned by some appropriate bases to the various
functions. Costs which cannot be associated or connected with a particular unit of the
final product is termed as indirect costs. Indirect costs cannot be identified and
allocated with cost centres or cost units and therefore they are apportioned on some
equitable basis to cost centres or cost units.
Eg:
(i) Advertisement expenses.
(ii) Office rent.
(iii) Packing expenses [Note: Primary Packing Materials – Direct Cost Secondary
Packing Materials – Indirect Cost]
(iv) Depreciation on Furniture.
(v) Legal expenses.
(vi) Cost of consumable stores.
(vii) Salaries of foreman, supervisor, factory manager.
(viii) Rent and rates,
(ix) Printing and stationery,
(x) Telephone expenses,
(xi) Heat and light,
(xii) Maintenance, etc.