Final answer:
Indirect costs encompass expenses like heat, electricity, or malpractice insurance which are not directly tied to production. They differ from fixed costs, which remain constant irrespective of production levels, and variable costs, which change with the production volume.
Step-by-step explanation:
The costs that do not include direct labor, such as heat, electricity, or the costs of malpractice insurance, are referred to as indirect costs. Indirect costs are costs that are not directly attributable to a specific product or service, making them different from direct costs such as materials and labor used in the production of goods. When considering the structure of a company's expenses, it's important to distinguish these from fixed costs and variable costs. Fixed costs are expenditures that do not change with the level of production, such as rent on a factory or a retail space. These costs must be paid regardless of how much is produced. On the other hand, variable costs fluctuate with production volume; for instance, the raw materials needed to manufacture products. Understanding the balance of fixed, variable, and indirect costs is essential for businesses when analyzing their cost structures and making strategic financial decisions.