For students or parents, tuition is an expense. What are ExpensesĪn Expense is the amount of money spent in order to buy or do something. In common usage, an expense or expenditure is an outflow of money to another person or group to pay for an item or service, or for a category of costs.įor example For a tenant, rent is an expense. Overheads are the expenditure which cannot be conveniently traced to or identified with any particular cost unit, unlike operating expenses such as raw material and labor. Overhead Expenses are expenses that cannot be allocated to service, job, etc… because they are charged to a different job, services, cost centers etc… they only go through apportionment and absorption. A cost object is any item for which you are measuring expenses, such as products, product lines, services, sales regions, employees, and customers. A direct expense is an expense incurred that varies directly with changes in the volume of a cost object. What are Direct Expenses?ĭirect Expenses are expenses which are directly allocated to a job, service, cost centre, cost unit, or to a process.
Overhead costs are considered fixed costs, that is, they do not rise or fall directly with the cost of goods sold. Overhead costs are important to monitor and control. Indirect costs include administration, personnel and security costs. Indirect costs may be either fixed or variable. Indirect costs are costs that are not directly accountable to a cost object (such as a particular project, facility, function or product).
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