Meaning & use
indirect expense
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Meanings
nouncountablebusinessfinance
A business cost not directly tied to producing a particular product, such as rent, utilities, or administration.
Grammar: Countable; often used in the plural: 'indirect expenses'.
Patterns
- indirect expenses
- an indirect expense
- cover indirect expenses
- reduce indirect expenses
Rent and electricity are indirect expenses because they are not tied to one product.
The company cut indirect expenses by moving to a smaller office.
Accountants separate direct costs from indirect expenses.
nouncountablebusinessfinance
Any cost that supports the whole organization rather than a specific project or department.
Grammar: Often used with 'allocate' or 'apportion': allocate indirect expenses to departments.
Patterns
- allocate indirect expenses
- indirect expenses for something
The manager had to allocate indirect expenses across all departments.
Insurance is an indirect expense that benefits the entire firm.
Word forms
| plural | indirect expenses |
|---|
Common combinations
- indirect expenses
- The budget lists direct materials and indirect expenses separately.
- reduce indirect expenses
- We reduced indirect expenses by renegotiating the lease.
- allocate indirect expenses
- The accountant allocated indirect expenses to each division.
- cover indirect expenses
- The grant does not cover indirect expenses like office rent.
Synonyms and how they differ
- overhead
- Overhead (or overheads) is the everyday word for ongoing business costs; indirect expense is the more technical accounting term.
- indirect cost
- Almost the same meaning; 'cost' is more common in general business writing, while 'expense' is common in accounting.
- fixed cost
- A fixed cost does not change with output, but it may be direct or indirect; an indirect expense is defined by not being tied to a specific product.
Opposites
Word family
- indirect cost noun
- A cost not directly linked to a product; often used interchangeably with indirect expense.
- direct expense noun
- A cost clearly tied to making a product, such as raw materials.
Commonly confused: indirect expense or incidental expense? indirect expense or direct expense?
indirect expense vs incidental expense
An incidental expense is small and unexpected; an indirect expense is regular and supports the whole business.
indirect expense vs direct expense
Direct expenses can be traced to a product; indirect expenses cannot.
Practice
Which of these is most likely an indirect expense for a bakery?
Choose one answer.
Rent supports the whole shop and is not tied to one product, so it is indirect. Flour, baker's wages, and sugar for a specific order are direct costs because they can be traced to particular goods.
Make it your own
Write a sentence using “indirect expense”, then check it and compare it with the examples above.