Direct Costs

Direct costs are those costs that can be assigned to a specific cost object.

Direct costs in practice: With the direct costs are tracked costs that can be clearly applied and monitored to a cost object, for example:

• Direct product costs (consumption of materials for production, sales costs, costs for its promotion)
• Direct costs of the people (e.g. staff costs, travel expenses, car, mobile phone)
• Direct costs of the branch (the combined costs of all employees at the branch and aggregate overhead costs of the branch)

It is a management decision whether, how and to what the costs will be monitored. First, the structure of cost object must be chosen and then the direct costs can be assigned to them. Direct costs may be fixed or variable.