Legal Definitions - indirect cost

Definition: Indirect cost refers to a cost that is not directly related to the production of a specific good or service, but arises from production activity in general. It includes overhead allocations for general and administrative activities.

Examples: Examples of indirect costs include rent, utilities, salaries of administrative staff, and office supplies. These costs are not directly related to the production of a specific product or service, but are necessary for the overall operation of the business.

Explanation: Indirect costs are expenses that are not directly tied to the production of a specific product or service, but are necessary for the overall operation of the business. For example, rent is an indirect cost because it is necessary to have a physical space to operate the business, but it is not directly related to the production of a specific product. Similarly, salaries of administrative staff are indirect costs because they are necessary for the overall operation of the business, but not directly related to the production of a specific product or service.