explanation for your query is as follows: a) Entity XYZ has 2 activities normal revenue generating expenses and IP creation.
b) direct expenses include your Manpower expenses ( salaries & wages), direct machinery cost ( depreciation), any direct expenses items of revenue nature (materials required for generation), this i believe you could identify with the available data with the client.
c) indirect expenses include the following: i) proportionate administration expenes like rent, power, other general expenses. ii) propertionate marketing expenses like demo etc.... iii) proportionate interest expenses apportionate on a reasonable basis. iv) expnses incurred for travel, and other.
you can apportion all the relavent and other indirect expenses to the project, provided you should have a reasonable basis for allocation of the said project.
CAclubindia
