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John Moffat.
John Moffat.-
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ryan32
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electricity for running the machines is a variable cost as the more hours we operate the machine more will be the electricity usage and cost will also increase proportionately.But since it also include a fixed charge, that makes it a semi variable cost.
my question is why electricity is an indirect cost?
is it because exactly we can’t tell how much electricity get used up in producing 1 unit so thats why we can’t allocate that cost to one unit and thats why is an indirect cost and therefore the monthly electricity cost is absorbed by the units thru overhead absorption rate based on machine or labor hours
am i right?.
John Moffat
- Topics: 57
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Yes – you are right.
Direct costs are those that can be directly measured for each unit, and are usually just the materials and labour costs.
Have you watched the free lectures on this?
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