a small doubt in costing

Originally posted by : Mayank kharbanda
	wht ia da nature of the following expense:- Sales commision to agents on the basis of units sold. I know its a part of selling and distribution expenses but i want to know whether its a direct expense or a indirect.

Hi Mayank,

A full answer would be like this in the exam:

Direct costs are those costs comprising direct materials, direct labor and direct expenses which can be traced directly to specific jobs, products or services.Whereas Indirect costs are those which cannot be traced to particular products. An example is rent or management salaries. They are usually shared by more than one product and are called overheads.

The case here seems confusing as the salesman attributes the commision on the basis of units sold.

However,to form the product,the salesman commission cost is not factored-in.In otherwords,it is not traceable directly to the Product to form its cost and thus by default because a non-direct cost,which can be clubbed under Indirect Cost.

Hope this helps...