Definition of Direct Cost

Direct costs are directly associated with the production of the goods or services offered. If a company is manufacturing hybrid vehicles, it includes the cost of raw material like steel sheets, fiberglass, etc. It also includes the cost of ready to fit components like tires, electrical components, or windshield.


When the vehicle goes to the finishing line, the cost of paint or clear coating is also included indirect cost. Wages of workers and rent of production unit also counts the indirect cost.  Direct cost is easy to calculate as compared to indirect cost.

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