This document discusses direct and indirect costs, and how to allocate indirect or overhead costs across multiple units of output. It notes that direct costs are specifically associated with each unit, while indirect costs cannot be directly identified with a particular unit. Common direct costs are raw materials and direct labor, while indirect costs include rent and administrative wages. The document discusses different methods for allocating indirect costs, including allocating them equally across units or based on direct labor hours, with the logic being outputs requiring more labor utilize more overhead services. It acknowledges there is no single correct method, and the goal is to find a fair and logical basis that provides useful information to decision makers.