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The existence of external benefit and external cost leads to misallocation of resources. External cost For example, when drivers are not liable for the health damage of car exhaust, drivers will equate only marginal private cost with marginal benefit. But if drivers are forced to pay for the health damage of car exhaust, their marginal cost will go up by the amount of the external cost.
Indirect costs are costs that are not directly accountable to a cost object (such as a particular project, facility, function or product). Indirect costs may be either fixed or variable.Indirect costs include administration, personnel and security costs. These are those costs which are not directly related to production.Some indirect costs may be overhead. But some overhead costs can be directly attributed to a project and are direct costs. There are two types of indirect costs.irect costs are directly attributable to the object. In construction, the costs of materials, labor, equipment, etc., and all directly involved efforts or expenses for the cost object are direct costs.