An expense that is readily traced to a department because it is incurred for that department's sole benefit is a Direct expense.
What is Direct expense?
- Direct expense are incurred costs that change directly with changes in the quantity of a Cost Object.
- A cost object is an item that measures expenses.
- Products, product lines, services, sales territories, employees and customers.
- Examples of Direct expense include manufacturing royalties, labor costs, rental costs for using specific equipment for specific jobs, costs for specific designs or drawings required for the job, software services specifically required for the job, specific There are travel expenses for work.
- Direct expense are expenditures that are related to a specific cost object, while indirect expenditures are related to the business as a whole and not to a specific cost object.
- Indirect and direct costs are either fixed or variable costs. Most of the company's expenses are overhead.
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