Understanding Direct and Indirect Costs in Business

What are examples of indirect costs in business?

Which of the following items would be considered indirect costs? Select all that apply:

- Equipment rental costs

- Personnel wages

- Support services, such as legal, IT, or administrative costs

- Costs for transportation and facility rentals

Answer:

Indirect costs in your list include: support services like legal, IT, administrative costs, and costs for transportation and facility rentals. Equipment rental costs and personnel wages are typically considered direct costs.

In business, indirect costs are those costs that are not directly accountable to a cost object and are often spread across multiple departments as operational expenses. Support services such as legal, IT, or administrative costs, and costs for transportation and facility rentals are examples of indirect costs.

These costs support the overall functioning of a business but cannot be directly attributed to a single product or service. On the other hand, equipment rental costs and personnel wages are usually considered direct costs as they can be directly linked to a particular cost object.