Understanding Direct Costs: Definition, Examples, and Importance

A direct cost refers to any expense that can be directly attributed to the production of specific goods or services. These costs are incurred in the manufacturing process and can be traced back to a specific product, project, or department.

Variable Costs

Variable costs exhibits a direct correlation with fluctuations in sales volume or production output. As production escalates, variable expenses surge proportionally, and conversely, they diminish with production downturns.