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Management accounting 2022

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Question:

What is the difference between direct and indirect costs

Author: Hjalmer Pedersen



Answer:

Direct costs are costs that are related to the cost object directly and can be measured directly in money terms. I.e., tires used to produce a car. Hence, the costs can be put directly on the cost object. Indirect costs cannot be traced directly to the cost object; hence these costs are allocated to the cost object.


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