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This booklet contains the Study Guide for Paper 4: Accounting for Costs. The Study Guide is designed to help you plan your studies and to provide more detailed interpretation of the syllabus for ACCA’s Certified Accounting Technician examinations.
Expenses are amounts paid for goods or services purchased. They can either be directly or indirectly related to the core business operations. The type of expense and timing at which it is incurred by the business frames the key points of difference between direct and indirect expenses.
Direct and indirect costs are reported under two separate line items on an income statement: Direct expenses and allocated indirect expenses are reported as costs of goods sold to calculate gross profit. Unallocated indirect expenses are reported as operating expenses to calculate operating profit.
Fundamental concepts related to indirect cost allocation. Differences between overhead and G&A pools. Understanding allocation bases. Pool & Base relationship. Significance of indirect rates. Steps in allocating indirect costs to contracts. Life cycle of indirect rates. Indirect Cost Rate Analysis. Page | 2
• Direct costs are those costs that can be identified specifically with a particular sponsored project, an institutional activity, or any other institutional activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy.
Direct costs are costs that can be attributed to a specific product or service, and they do not need to be allocated to the specific cost object. Indirect costs are costs that cannot be easily associated with a specific product or activity because they are involved in multiple activities.
Hi there, in this video we are going to look at when product, labour and overhead costs are treated as being direct or indirect, as well as look at the allocation of overheads, and we are going to round it up altogether by calculating the total cost to make a milkshake.
