Problem
If you are not currently working, please answer the question based on a prior job. If you have never worked, please answer the question based on an organization that is familiar to you such as a pharmacy or a doctor's office.
A direct cost is a cost that is specifically associated with a 'cost object'. A 'cost object' can be a particular unit, department, a particular patient, etc. Examples of direct costs include salaries, medical supplies, and utilities.
An indirect cost is a cost that cannot be specifically associated with a a particular 'cost object'. For instance, facility costs, administrative costs, general marketing costs, etc.
Answer the following questions based on your current employer:
A. What is the name of the organization? What department do you work in (if any)?
B. What type of organization is this (e.g., a hospital, a pharmacy)?
C. In order to identify a direct or indirect cost, you need to identify a cost object. What cost object will you be selecting for your organization?
D. Based on your identification of a cost object, provide one example of a direct cost and explain why this cost fits the definition of a direct cost.
E. Based on your identification of a cost object, provide one example of an indirect cost and explain why this cost fits the definition of a direct cost.