The category of indirect expenses of a business company involves all those general expenses which cannot be incurred for any particular product or service directly. Further, it includes all those cash given for using the buildings and charges for using certain provisions like telephone service, photostat machine and so on.
These overhead charges can be further subdivided into following major types.
- The factory or the overhead works. This can be also referred to as the manufacturing or production charges which contain costs of indirect materials, indirect means of labor and even is inclusive of all other indirect expenses incurred in the factory. Consider, for example, the factory rent and insurance and also, the depreciation amount of factory building and the machinery being used for its production purpose.
- The overhead charges from the office or the administration sector. This includes all the indirect costs incurred by the company office for efficiently conducting the administration and management of the business enterprise.
- And finally, the selling and distribution overheads. These can be compared to the indirect costs taken in relation to the marketing and sale department. For example, proper advertising, salary,and commissioning of related sales agents, other traveling expenses of salesmen are categorized in this particular type.
Classification of cost can also be done with regards to the variability features. Thus, it can be potentially grouped as
- The fixed costs.
- Variable costs.
- And the semi-fixed or semi-variable type.
These minor variations are with respect to the changes in cost behavioror can be also related to changes in output or activity or quantity of production. Activity can be taken in the sense of working hours, or the output units derived and even the sales made. It is quite difficult to differentiate the cost factor of the costing operation into a variable and fixed mode. This is so because certain costs are really identifiable mainly due to its typical nature but still, there is another costing group which can be segregated only after precisely observing its various aspects and carefully evaluating their behavior.
Know more about the fixed costs
This is the category of the cost that shows no variations for a given period. Even if there exists a wide fluctuation in terms of output or volume of activity, these costs are more or less steady in nature. In fact, such cost is met by the organization irrespective of the given volume level. Hence, this cost is also referred to as the capacity or the standby period cost. It is inclusive of the salary for supervisors, advertising and other tax charges.Look at here now for more information.