Direct Cost

P Bramodh
312917251004
 ● Definition
Contents ● Understanding direct cost

● Examples
Definition
1. A direct cost is a price that can be
utterly attributed to the production of
products or services. Some costs, such
as direct materials, direct labor,
equipment are examples of common
direct costs.

2. In some cases, it is possible to classify

an indirect cost as a direct cost. For
instance, the salary of the manager
who controls multiple concrete batch
plants would be
considered as an indirect cost for each
batch plant. However, that manager’s
salary would be a direct cost for the
department which comprising all of those
concrete batch plants.
Understanding Direct cost
● Although direct costs are typically
variable costs, they can also include
fixed costs.
● Rent for a factory, for example, could
be tied directly to the production
facility. Typically, rent would be
considered overhead. However,
companies can sometimes tie fixed
costs to the units produced in a
particular facility.
Direct Cost examples
Any cost that's involved in producing a good, even if it's only a portion of the cost
that's allocated to the production facility, are included as direct costs. Some
examples of direct costs are listed below:

● Direct labor
● Direct materials
● Manufacturing supplies
● Wages for the production staff
● Fuel or power consumption
Because direct costs can be specifically traced to a product, direct costs do not need
to be allocated to a product, department, or other cost objects. Direct costs usually
benefit only one cost object. Items that are not direct costs are pooled and allocated
based on cost drivers.