Costs which are easier to relate the cost of the product or service are called as direct costs. Costs which cannot be directly related to the cost of the product are called indirect costs. For a product, raw material costs or the labor cost to make the product are the direct costs which can be associated with the product. However cost of depreciation, cost of electricity can be said to be indirect costs. Thus the indirect costs are not directly related to the product but need to be associated with the product through some unit distribution or some definite method. Cost of supervision, insurance and power are some of the common indirect costs. There are different ways like ABC costing; direct cost method can be used to allocate the costs to the products. To determine the price of the product firm need to allocate all the costs to the product. Thus the indirect costs are allocated through some other measure and it may not be appropriate. Thus allocation of indirect costs to the cost of product is always an important aspect in costing of the product and the firm need to careful in pricing the product else it can lead to mispricing of the product (Horngren, 2012).