COMSATS Institute of Information Technology, Islamabad

Assignment # 1
Program: MPA

Instructor: Abdullah

Naeem
Semester: IV

Course Code: 405

Date: May 3, 2016

Title: Public Finance

Assignment Topics/Question: Differentiate between

I.
II.

Direct Benefit Vs Indirect Benefit

Direct Cost Vs Indirect Cost

Answer of Question No. 1

Direct Benefit Vs Indirect Benefit (On Projects)
Irrigation Project
On Irrigation Project, the purpose of the Direct and Indirect Benefits is to
increase the fertility of particular tract of land if we work on Irrigation Project.
Direct Benefits: Direct Benefits are the benefits which attributable / concern to
the purpose of the project (Government). Direct benefits are those benefits
which increase in output and productivity related to the purpose of the project.
For example, in the above said project (Irrigation Project), the purpose of direct
benefit is to increase the fertility of a particular tract of land.
The direct benefit in this case will be the net increase over time in agricultural
output on the tract of land being irrigated.
In corporate terms, we can say that the direct benefits are optional, non-wage
compensation provided to employees in addition to their normal wages or
salaries i.e. group insurance (health and life etc.), retirement benefits and
funding of education.
Indirect Benefits: Indirect Benefits are the benefits which attributable and
related to the project (Government) that were not part of the intended purpose
of the project. Indirect Benefit increases in adjoining lands output. Indirect
benefits accruing to individuals not directly associated with the purpose of the
project.
For example, in irrigation project, the indirect benefits might include the
improved fertility of adjoining land which is not irrigated by the scheme which
results from changes in the height of the water table in the area.
In corporate terms, we can say that an indirect benefit is a return that cannot be
directly observed but is realized.

Muhammad Imran Irshad: FA14-MPA-002/cvc

COMSATS Institute of Information Technology, Islamabad

Assignment # 1
Answer of Question No. 2
Direct Cost Vs Indirect Cost
Irrigation Project
On Irrigation Project, the purpose of the Direct and Indirect Costs is to increase
the fertility of particular tract of land if we work on Irrigation Project.
Direct Cost: Direct Cost means that the resources which are employed in the
project.
Indirect Cost: Indirect Cost decreases in water level in surrounding areas.
Here is difference between Direct Cost and Indirect Cost: Direct Cost

Indirect Cost

The direct cost is a cost which is

Indirect cost is a cost which

easily

cannot

attributable

to

cost

be

allocated

to

object.

particular cost object.

The direct cost is for specific

The indirect cost is for multiple

projects

projects

When the all direct costs are

The total of all the indirect costs

taken together, they are known

is called as overheads.

as prime costs.

The direct cost is traceable.

The indirect cost is not traceable.

(Untraceable)

The direct cost is classified as

The indirect cost is classified as

direct material, direct labor and

indirect material, indirect labor,

direct expenses.

indirect overheads

Muhammad Imran Irshad: FA14-MPA-002/cvc

COMSATS Institute of Information Technology, Islamabad

Assignment # 1

Muhammad Imran Irshad: FA14-MPA-002/cvc