Indirect Costs

1. An indirect cost is a cost that cannot be identified with or traced to a given cost object in an economic manner. Indirect material and indirect labor fit into this category. Indirect costs are accumulated in a cost pool and are then allocated to the various cost objects on some reasonable basis. Indirect costs are part of overhead and normally include both fixed and variable components. See also direct material and direct labor and overhead and common costs and cost pool. Any cost not directly identified with a single final cost object, but identified with two or more final cost objects or with at least one interme- diate cost object. All costs other than direct materials and direct labor. (Also called overhead cost or burden.)