Costs can be of a direct or indirect nature. Direct costs can easily be assigned to certain goods or services and with indirect costs you have to use an allocation key and journal entries. However, the distinction is by no means always clear, for example when a DGA produces goods itself, but is also active in the general policy of the company. Below we explain a few things.
Meaning of Direct Cost, what is it?
Direct costs are expenses that can be allocated “directly”, for example to a specific customer, product, purchase or department. With direct costs it is therefore easy to judge what the result of the cost is, why the cost is necessary, and so on. Examples of direct costs and how they can be allocated:
Also interesting: https://corlidogroup.com/expertises/invoice-and-supplier-base-reduction/
Meaning of Indirect Cost, what it is?
With indirect costs, it is not possible to allocate expenses “directly” to a specific customer, product, purchase or department. In other words, here the costs are not easy to allocate and an allocation key must be used for the allocation. Examples of indirect costs and why they cannot be allocated:
Read about source to pay.
These indirect costs must be allocated to the turnover of various products or services on the basis of an allocation key. For example, if the customization machine produces 80 times the product X and 20 times the product Y, the depreciation costs can also be allocated for 80% to the turnover of the product X and 20% to the turnover of the product Y Sometimes, however, it is less simple.