Indirect costs

Indirect costs are the costs of running a business and going to market with a product or service—regardless of the volume manufactured and/or sold. In other words, they are not directly related to making a product or service, or buying a wholesale product to resell. (This distinguishes them from direct costs.)

Indirect costs include a company’s operating expenses (also called selling, general and administration expenses), and are usually closely managed by business owners. They do not fluctuate directly with manufacturing or purchase volumes so they are typically described as fixed or semi-variable in nature.

More about indirect costs

Here’s an example of how indirect costs appear on a manufacturing company’s income statement. In this case, ABC Company manufactures a single product. The selling, general and administration expenses to go to market are $15,000, $5,000 and $5,000, respectively.

That means the total indirect costs to go to market are $25,000.

indirect costs