Saudi Electronic University Direct and Indirect Cost Questions Response

Please avoid plagiarism and about 150 words is enough

“Total costs of a business are in practice. The costs of such items as materials used, power and wages all lead to bills that have to be paid. What is not so clear is how these costs should be allocated to supply chain processes – or even to products for that matter. Christopher (2005) states that problems with traditional cost accounting as related to logistics include:

● the true costs of servicing different customer types, channels and market segments are poorly understood;

● costs are captured at too high a level of aggregation;

● costing is functionally oriented at the expense of output;

● the emphasis on full cost allocation to products ignores customer costs.

The important point here is that the total cost is constant: it is the ways we analyse that cost that are different. Why analyse it in different ways? To gain better information about our cost basis so that we can manage the business better.”

What is direct cost and indirect cost give your answer along suitable examplets?