Direct costs definition. Analyzing the definition of key terms often provides more insight about concepts. Direct costs can be defined as – Costs incurred for the benefit of one specific cost object. Direct costs can be contrasted with indirect costs. Direct costs are generally costs that can be tracked specifically to an item of inventory or process and the term direct costs is often used in a manufacturing company. Direct costs include direct materials and direct labor. Direct material can be tracked to a job or process and direct labor can be tracked to a job or process. Indirect costs are costs that cannot be tracked to a job or process and are generally grouped in overhead. Indirect costs include indirect material, indirect labor, and indirect costs related to the production facilities, the factory.
