Direct vs indirect costs
| Direct costs | Indirect costs |
|---|---|
| Expenses that go directly into producing goods or providing services. | General business expenses that keep the business operating. |
Key terms
- Direct material — the resources used to make a product.
- Direct labour — the people whose labour directly produces the output.
- Prime cost — the costs directly related to the purchase and handling of goods; it changes as the quantity of goods produced changes.
- Factory overheads — the indirect expenses involved in producing the company's product.