what is direct cost

Direct costs are expenses that can be directly tied to the production of specific goods or services. They are directly attributable to a cost object, such as a particular project, facility, function, or product. Direct costs are those for activities or services that benefit specific projects, such as salaries for project staff and materials required for a particular project. Examples of direct costs include direct labor and direct materials. In construction, the costs of materials, labor, equipment, and all directly involved efforts or expenses for the cost object are direct costs. In manufacturing or other non-construction industries, the portion of operating costs that is directly assignable to a specific product or process is a direct cost. Direct costs are often variable costs, meaning they fluctuate with production levels such as inventory, but they can also be fixed costs, such as rent for a factory.