What is an indirect cost? In simple terms it is any cost which is not directly responsible for a particular output but nevertheless contributes to the overall cost of production. Indirect Costs can be either constant or variable.
Indirect Costs consist of personnel, administration and material costs. These are all costs that aren’t directly associated with production. Some indirect expenses may also be overhead costs. All these expenses are included in the overall cost of production of the goods.
What is an indirect cost accountant? A cost accountant is someone who helps business owners and managers effectively measure, assess and control indirect costs. The primary objective of an indirect cost accountant is to enable a company to effectively control and limit its exposure to risks and to maximize the return on investment (ROI). Cost accountants help business managers by helping them properly document, track and control indirect costs and identifying those that can be eliminated or transferred to other departments or to buyers.
To measure the cost of production, a manager should make note of all the indirect costs of production such as the cost of materials and the cost of utilities etc. Then he should calculate the direct cost of production, which is the total cost of producing the goods minus the indirect cost of production. The result will be the production cost.
How can a cost accountant help you? Cost accountants can make a huge difference to the quality of the goods produced and to the bottom line. They can give a business manager a bird eye view of how much each department is spending and what they can do to improve production efficiency. A cost accountant can also provide a company with a break down of exactly what is being spent in different areas by departments such as human resources, marketing, sales and production etc. This kind of analysis is essential to get a full picture of how your business is performing financially.
How do I know what is an indirect cost? Generally when you sign up for an accountancy service, you will receive a statement that gives you the direct and indirect cost of doing business. What this means is that when you are paying someone to do work for you it is considered an indirect cost to your business. An indirect cost accountant can help you to work out what is an accurate measurement of your actual production cost. If your cost accountant cannot give you a straight answer, you may need to bring in another expert.
What is an indirect cost accountant used for? An indirect cost accountant can help you manage and control the cost of production through various strategies. They are essential in a number of industries, where there is the problem of how to measure the cost of a product, where it is sometimes hard to record all the costs associated with a job, but also where certain jobs, where there is a high degree of automation, can be difficult to calculate without a detailed analysis of the task in hand. Indirect cost accountants are also used in the financial services industry and many firms employ them to help them keep track of what is being spent for their business.
So what is an indirect cost accountant and what does he or she do? An indirect cost accountant analyses the costs of doing business. They are used by many types of businesses and organizations in all industries and are essential. So, whether you are a large corporation or a small company you should definitely use an indirect cost accountant. They are essential to any business, no matter what type of industry you belong too.