Direct expenses is directly attributed to cost unit/cost center. It includes all direct cost except the direct material and direct labour.
Types of Direct Expenses are as under:
(i) Royalties if it is charged as a rate per unit.
(ii) Hire charges of plant if used for a specific job.
(iii) Sub-contract or outside work, if jobs are sent out for special processing.
(iv) Salesman’s commission if it is based on the value of units sold.
(v) Freight, if the goods are handled by an outside carrier whose charges can be related to individual units.
(vi) Travelling, hotel and other incidental expenses incurred on a particular contract.
(vii) Cost of making a design, pattern for a specific job.
(viii) Cost of any special process not forming part of the normal manufacture like water proofing for canvas cloth.
Find an amazing quiz on direct expenses.