Indirect Cost

2.       The Indirect Costs

These are all other costs, except direct costs, that you have for running your business, for example rent, interest and electricity. Indirect costs are normally not directly related to one particular product or service. Indirect costs are sometimes called overheads or expenses.

You must understand the different types of costs to be able to calculate the total costs for any product or service your business makes or sell.

Steps in Calculating a total costs of a product or service:-                    

1. Step 1, Calculate the Direct Material Costs                                    

2. Step 2, Calculate the Direct Labour Costs

3. Step 3, Calculate the Indirect Costs

4. Add the total Costs of a products or service. The following blocks demonstrate the steps to be followed when calculating the total costs of a product

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