Direct cost
Direct cost is a cost traceable to a specific cost object — a product, project, or department — in an economically justifiable way. The tracing must be both feasible and cost-effective.
Also known asdirect costs
See it move
A three-step flow diagram shows how a direct cost — such as leather used in one shoe model — moves from the point of incurrence through an unambiguous traceability check to assignment. Because the cost is economically feasible to trace to a single product without spreading it across multiple cost objects, the full amount is assigned directly to that unit's cost rather than passing through an overhead pool.
Check yourself
A manufacturer leases a specialist stamping press exclusively for one product line under a multi-year contract at a fixed monthly rental. How should the lease cost be classified relative to that product line?