1. Direct costDefinitionIt is an expense that can attract the manager to a specific cost object or cost center such as department, product or process. Direct costs vary with the rate of production but are uniform with each unit of production and are under the control and responsibility of the department manager. Most costs are fixed in the short run and flexible in the long run, which is why they are also called direct expenses on the cost variable.2. Indirect Cost Indirect cost is any cost not directly recognized with a single final cost objective but identified with two or more final cost objectives or an intermediate cost objective. It is not subject to conduct as a direct cost. After direct costs have been set and charged directly to the contract or other work, indirect costs are those that remain to be allocated to the various cost objectives. Indirect costs need not be allocated to a final cost objective if other costs incurred for the same purpose in similar circumstances have been included as a direct cost of that or any other final cost objective. In simple terms, indirect costs are those costs not voluntarily identified with a specific organizational activity or project but experienced for the joint benefit of both projects and other activities. Indirect costs are usually grouped into common pools and attributed to furthering objectives through an indirect cost rate or allocation process. An indirect cost rate is only a tool to fairly and quickly define the proportion of overhead that each project will tolerate. It is the ratio of an applicant's total indirect costs to an equitable direct cost base. Indirect Cost Ratio Indirect Cost Pool Direct Cost Basis = Indirect Cost Rate Indirect costs include costs wh...... half of the paper ......inear way with the number of units produced. Product-level costs: Costs are often fixed and directed in detail to a particular product. A sample is the salary of a product manager in charge of a single product. The Product Manager salary is a fixed cost to the company over a wide range of production volume levels. If the company abandons the product completely, the product manager is no longer wanted. Facility-level costs: Costs are generally fixed and direct relative to capacity. An example is the salaries of front office staff, such as the receptionist and office manager. The only reason ABC provides more correct product costing information is that old-style costing systems often allocate all overhead, including batch-level, product-level, and facility-level overhead, using an appropriate allocation base for unit-level costs only.