Direct expenses

Last updated: 26.03.2016

Direct expenses are costs that form part direct (prime) costs but are covered neither in direct material costs or direct labor costs. As being part of direct costs, they are directly and clearly identifiable with cost object (usually product or service). That means they are the costs DIRECTLY associated with the production process of specific product.

Examples of direct expenses: power consumption if it is clearly identifiable with the cost object (mostly specific product)

 

Because the production differs from industry to industry, or even from business to business it is difficult to prepare a detailed list of direct expenses. There are usually only a several general lists and definitions (see e.g. above) which can help to comprehend their meaning. Therefore, the final detailed classification is usually up to the entity.

 

More about direct costs and their booking here.



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