What is the difference between Direct Costs and Indirect Costs?

Answer 1

http://www.vcu.edu/finance/gc-admin/G&CDirect&IndirectCosts.htm

Answer 2

One is the expected and planned for costs associated with doing or obtaining something. The other are unexpected costs that were unforseen at the time the original idea was accepted. For example. Go buy a gallon of paint at the store. You planned on paying up to $20. That is a direct cost, you planned for it in your budget and the cost was known and accepted ahead of the purchase. When you got home however, you realized that the old paint brush you had and were counting on using was all dry and hard from old paint, and your dog ate your painters tape. So you were forced to go buy a new brush and a fresh roll of painters tape at a cost of $12. The $12 is an indirect cost because they were not planned for in the original plan but resulted FROM the purchase of the paint which necessitated their purchase to complete the job.

Answer 3

Direct costs are "those costs that can be identified specifically with a particular project, an instructional activity, or any other institutional activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy." Like cost of engine to make a car is a direct cost.

Indirect cost is like facilities and administrative costs that are incurred for common or joint objectives and therefore cannot be identified readily and specifically with a particular project. Like if you are department secretary or accounting manager, your salary is not charged to the particular project, because you work on every project.