Which of the following is NOT a direct cost?

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BDL MT Mechanical 16 April 2022 Official Paper
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  1. Raw material consumed during production
  2. Hire charges for tools and equipment
  3. Rent, tax, and duties
  4. Wages to laborers

Answer (Detailed Solution Below)

Option 3 : Rent, tax, and duties
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ST 1: BDL MT Thermodynamics
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Detailed Solution

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Explanation:

A project is crashed in order to complete the project in the optimum duration with the minimum corresponding cost.

The total cost to complete a project includes

Direct Cost: 

  • It is the cost directly involved with the completion of the project.
  • It includes the Raw material consumed during production, Hire charges for tools and equipment, Wages to laborer etc.

F1 M.J Madhu 03.04.20 D3

Indirect Cost: 

  • It is the cost not directly involved but it is necessary for the safe and timely completion of the project.

F1 M.J Madhu 03.04.20 D4

Total cost curve

F1 M.J Madhu 03.04.20 D5

  • Therefore when the project is crashed the direct cost will increase and the indirect cos will decrease.
  • During crashing of program for a project Direct costs increase, and indirect costs decrease.
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