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| Topic: |
Business
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| Number of pages / Number of words: |
9 / 2247 |
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They do not take into account costs such as admin expenses or electricity used. An example of a direct cost would be in the production of leather sofas or other related manufacturing industries. The direct cost is the actual leather which is used to make the sofa. However, costs can be further split into indirect costs which do not affect the production process...
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Again taking the leather sofa example to illustrate indirect costs, the salaries that are paid to the management do not affect the cost of producing the sofa itself even though they are associated with the production of the sofa.
It is important to understand that management accounting is forward looking and so the concept of future and past costs are relevant here...
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