Answered: How is the allocation of indirect costs…

Engineering

Civil Engineering

How is the allocation of indirect costs usually done?

Fundamentals Of Construction Estimating

4th Edition

ISBN:9781337399395

Author:Pratt, David J.

Publisher:Pratt, David J.

Chapter18: Life-cycle Costing

Section: Chapter Questions

Problem 1RQ

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Question

How is the allocation of indirect costs usually done?

Expert Solution

Step 1

Let's first understand what is indirect cost:

Indirect prices area unit those that can't be fully and clearly allotted to one product, service, project or program (unlike direct expenses like value of products oversubscribed or value of services). you'll notice indirect prices, on your statement, below the net profit line. For this reason, indirect prices area unit generally remarked as "below the road prices." On Associate in Nursing statement, these embrace line things like in operation expenses, taxes and interest.

Step 2

There are two way of Allocating indirect cost:

Cost Allocation plan
Indirect Cost Rate (ICR)

Step by step

Solved in 3 steps

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