What is Direct costs?
Direct costs: Costs tied directly to making a specific product.
Where Direct costs fits
Direct costs is part of Costs & Break-even in Accounting. Fixed costs stay constant, variable costs move with output, and break-even is where revenue covers both. Direct costs tie to a product, overhead does not.
Practical tip
Lower break-even by cutting fixed costs or raising unit margin.
Related terms
- Fixed costs
- Costs that stay the same however much you sell.
- Variable costs
- Costs that rise and fall with output.
- Cost of goods sold
- Direct cost of making what you sold.
- Overhead
- Ongoing costs not tied to a specific product.
- Depreciation
- Spreading an asset's cost over its useful life.
Formulas you will use with it
Test yourself
Which term means: “Costs tied directly to making a specific product.”?
Direct costs · Fixed costs · Overhead
Answer: Direct costs
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