3 related questions. On AHPP page 410, Glossary of key accounting terminology:
Indirect Expense: Total Indirect Expenses includes Indirect Labor. (It says the similar thing when explaining the concept of Indirect Labor).
Definition of Direct Expense: Project-related expenses for a firm and its outside consultants that are not reimbursable, plus project-related expenses included in all lump sum fee contracts.
Direct Labor: Same as direct salary. Represents time charged to projects, whether invoiced or not (by everyone, including principals).
1. How about the Direct Expense vs. the Direct Labor? Does Direct Expense includes the Direct Labor as well? AHPP does not say anything about the relationship between these 2 terms, and my friend and I disagreed on this. I thought Direct Labor is not a "non-reimbursable" cost, so it does not belong to the category of Direct Expense. However, he read on multiple accounting websites, which pointed out that Direct Expense does include Direct Labor (billable hours spent on producing the products). We're confused...
2. "Direct Labor: Same as direct salary. Represents time charged to projects, whether invoiced or not" - so this "direct salary" is the $$$ architects charge clients, or the actual $ the firm pays the architects?
3. Definition of Direct Expense: Why it specifically mentions to "plus project-related expenses included in all lump sum fee contracts"? Most architects' contracts are stipulated sum anyways.
If not all 3, shedding some lights on any of these questions would help us understand the terms a lot. Thank you very much.
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