Finance: What is Indirect Cost?

Indirect costs are any cost associated with running a business, other than costs for materials that are directly used to produce your company's goods.

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Transcript

00:22

handles the pain the radio and the two gallon cup

00:25

holder for holding supersize slurpees Direct build one car and

00:29

you have to pay for this stuff in cash No

00:32

ambiguity Alright these air direct costs of building the car

00:36

But what about indirect costs Well indirect is a totally

00:40

different animal So like whether you build one car that

00:43

day or one hundred Well you have to heat the

00:45

building at least in january in detroit That heat is

00:48

an indirect cost of building the car And yes it's

00:52

not really Detroit it's pontiac michigan Or wherever But we're

00:55

just saying it's cold there What about the insurance he

00:57

had to carry for the car company or the lawyers

01:00

you employ Or the least back on the giant robot

01:03

car makers or the unpaid obligations into the union pension

01:08

fund All indirect costs So yeah it's all the stuff

01:12

You basically have to pay for in order to stay

01:15

in business and avoid major lawsuits So you can continue

01:18

to pay for all those direct costs that actually go

01:21

into the making of your product Like the direct costs

01:24

you can think of as you know kind of things

01:26

that produce a gross margin And the indirect costs you

01:30

know kind of produce an operating margin Just saying All

01:33

right so just make sure that when you're building a

01:35

car you don't sell gps system that gives you in 00:01:38.489 --> [endTime] directions See that That would be bad This