Direct indirect expenses
This query is : Resolved
13 April 2014
Dear Experts
Repairs to Machinery
Depreciation on Machinery
Machinery Running Expenses like oil etc.
Are above direct or indirect expenses?
Why?
shivani
shivaniadream@gmail.com
Repairs to Machinery
Depreciation on Machinery
Machinery Running Expenses like oil etc.
Are above direct or indirect expenses?
Why?
shivani
shivaniadream@gmail.com
14 April 2014
all these expenses are not directly allocable to goods, hence these are indirect expenses.
15 April 2014
Dear Arun Sir
But aren't these expenses raise the cost of production.
I mean aren't these production overheads.
Does any AS or Guidance Note say anything about this topic?
shivani
But aren't these expenses raise the cost of production.
I mean aren't these production overheads.
Does any AS or Guidance Note say anything about this topic?
shivani
15 April 2014
yes these are production overheads, but here u asked whether they are direct or indirect.
so these are indirect expenses, as these don't vary according to volume of production.
i think you must read cost accounting std A-21 for guideline note
so these are indirect expenses, as these don't vary according to volume of production.
i think you must read cost accounting std A-21 for guideline note
15 April 2014
oki doki
thanks
repairs and depreciation doesn't depend on the number of units we produce.
but oil consumed by machine?
I have doubts on it.
the more units we produce don't we need more oil?
thanks
repairs and depreciation doesn't depend on the number of units we produce.
but oil consumed by machine?
I have doubts on it.
the more units we produce don't we need more oil?
16 April 2014
ya your logic is correct, but see as you cant apply oil etc as per your requirement, you have to overhauling as per specified time or units generated.
one more thing we are talking about what is defined in guidelines etc, so direct expenses which are allocable to cost of unit are direct material, direct labor, power & water for running machinery and direct freight.
one more thing we are talking about what is defined in guidelines etc, so direct expenses which are allocable to cost of unit are direct material, direct labor, power & water for running machinery and direct freight.
19 April 2014
Dear Arun Sir
Why cant oil consumed be allocated to units produced?
If say we changed oil after producing 1000 units and cost of oil is Rs. 10000 then cost allocated per unit is Rs. 10.
shouldn't oil consumed by machine be a direct expense.
Why cant oil consumed be allocated to units produced?
If say we changed oil after producing 1000 units and cost of oil is Rs. 10000 then cost allocated per unit is Rs. 10.
shouldn't oil consumed by machine be a direct expense.
19 April 2014
Dear Shivani ji,
as i said above your logic is right, but we are talking about what is defined in books and practice.
as per this direct costs elements are marked (as i told above) and rest are indirect.
if we take your logic, as per this repair and maintenance also can be consider as direct cost, as some parts of machines are replaceable after a certain production like inserts, dyes etc. but it cant held as direct cost.
as i said above your logic is right, but we are talking about what is defined in books and practice.
as per this direct costs elements are marked (as i told above) and rest are indirect.
if we take your logic, as per this repair and maintenance also can be consider as direct cost, as some parts of machines are replaceable after a certain production like inserts, dyes etc. but it cant held as direct cost.
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