Direct Costs vs Indirect Costs

The video tutorial explains the difference between direct and indirect costs. Direct costs can be easily traced to a specific cost object, such as the lumber used in building a house. Indirect costs, like nails or hammers, cannot be easily traced to a single cost object because they are used across multiple projects. The tutorial provides examples to illustrate these concepts, helping viewers understand how to categorize costs effectively.

How would you allocate the cost of a hammer used in construction?

Why is it difficult to trace indirect costs back to a specific cost object?