Definition of 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.
An expense that can be traced directly to (or identified with) a specific cost center or cost object such as a department, process, or product.
Direct costs (such as for labor, material, fuel or power) vary with the rate of output but are uniform for each unit of production, and are usually under the control and responsibility of the department manager. As a general rule, most costs are fixed in the short run and variable in the long run. Also called direct expense, on cost, variable cost, or variable expense, they are grouped under variable costs.
A direct cost is a price that can be directly tied to the production of specific goods or services. A direct cost can be traced to the cost object, which can be a service, product, or department. Direct and indirect costs are the two major types of expenses or costs that companies can incur. Direct costs are often variable costs, meaning they fluctuate with production levels such as inventory. However, some costs, such as indirect costs are more difficult to assign to a specific product. Examples of indirect costs include depreciation and administrative expenses.
How to use Direct cost in a sentence?
- Direct costs examples include direct labor and direct materials.
- I wanted to know the direct cost before I purchased anything, because I had a limited budget that I could not lose.
- You should always try and figure out the direct cost of any project that you will be taking on in the future.
- Although direct costs are typically variable costs, they can also be fixed costs. Rent for a factory, for example, could be tied directly to a production facility.
- A direct cost is a price that can be directly tied to the production of specific goods or services.
- A direct cost can be traced to the cost object, which can be a service, product, or department.
- When you are about to make a major purchase their may be more than only the direct cost to factor in.
Meaning of Direct cost & Direct cost Definition