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Explain Direct cost and Indirect cost.
Direct Cost are all the expenses which can be identified with the individual product, service or job cost centre. In the manufacturing process of products, materials are purchased, labours are hired and wages are paid to them. All these take active and direct part in the manufacturing process.
Indirect Cost are all the expenses which cannot be identified with the individual product, service or job cost centre. The totals of indirect costs are termed as overheads. Example: salaries of storekeepers, foremen, work manager’s salary etc.
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