1. Direct expenses.

A. It is an expense includes that varies directly with changes in the volume of a

cost object. A cost object is any item for which you are measuring expenses, such
as products, product lines, services, sales regions, employees and customers.
Here are several examples of direct expenses:

 The materials are used to construct a product for sale.

 The cost of freight needed to transport goods to and from a manufacturing
facility.
 The labor incurred to produce hours billable to a client.
 Labor and payroll taxes paid based on the number of units produced.
 Production materials consumed during the manufacture of goods.
 The commission and payroll taxes related to sales of goods or services.

2. Direct cost and indirect costs.

A. Direct cost: The costs which are directly accountable to a cost object (such as a
particular project, facility, function or product). Some overhead costs which can
be directly attributed to a project may also be classified as a direct cost.

Indirect cost: The costs that are not directly accountable to a cost object (such
as a particular project, facility, function or product). Indirect costs may be either
fixed or variable. Indirect costs include administration, personnel and security
costs. These are those costs which are not directly related to production. Some
indirect costs may be overhead. But some overhead costs can be directly
attributed to a project and are direct costs.

3. Define cost accounting.

A. It is defined as a “systematic set of producers for recording and reporting

measurements of the cost of manufacturing of goods and performing service in
the aggregate and in detail. It includes methods for recognizing, classifying,
allocating, aggregating and reporting such costs and comparing with them with
standards costs.

4. Simple average stock method.

A. It is the method for inventory valuation or delivery cost calculation, where even
if accepting inventory goods with different unit cost, the average unit cost is
calculated by multiplying the total of these units costs simply by the number of
receiving.

5. Direct and indirect material.

A. Direct material: It is the cost of raw materials and components used to create a
product. The materials must be easily identifiable with the resulting product
(otherwise they are considered to be join costs).

Indirect material: This material is used in the production process, but which
cannot be linked to specific product or job. Alternatively, they may use in such
insubstantial quantities on a per-product basis that it is not worthwhile to track
them as direct materials (which involves including them in the bill of materials).
Thus they are consumed as the part of the production process, but are not
integrated in substantial amounts into a product or job.

6. Overheads

A. Overheads refer to the ongoing business expenses not directly attributed to

creating a product or service. It is important for budgeting purposes but also for
determining how much a company must charge for its products or service to
make a profit.

7. R & D costs.

A.