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Simple English definitions for legal terms
indirect cost
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A quick definition of indirect cost:
An indirect cost is a type of cost that is not directly related to making a specific product or providing a particular service. Instead, it is a cost that arises from general production activities, such as overhead costs for administrative tasks. It is also known as a common cost. For example, the cost of electricity used to power the entire factory is an indirect cost because it is not specific to producing a particular product.
A more thorough explanation:
Definition: Indirect cost refers to a cost that is not directly related to the production of a specific good or service, but arises from production activity in general. It includes overhead allocations for general and administrative activities.
Examples: Examples of indirect costs include rent, utilities, salaries of administrative staff, and office supplies. These costs are not directly related to the production of a specific product or service, but are necessary for the overall operation of the business.
Explanation: Indirect costs are expenses that are not directly tied to the production of a specific product or service, but are necessary for the overall operation of the business. For example, rent is an indirect cost because it is necessary to have a physical space to operate the business, but it is not directly related to the production of a specific product. Similarly, salaries of administrative staff are indirect costs because they are necessary for the overall operation of the business, but not directly related to the production of a specific product or service.