# direct cost

CEFR B2 · Compound

Source: https://englishreference.com/word/direct-cost
Updated: 2026-07-27

## Definition

an expense that a company can easily link to a specific product or service. It includes things like the raw materials and the labor used to make that item.

For teachers: an expenditure that can be specifically traced to a particular cost object, such as a product, service, or project. It typically comprises direct materials and direct labour.

## Examples

- The price of steel is a direct cost for the car manufacturer.
- To calculate the profit margin on each unit, the manager must first identify every direct cost associated with its production.
- While indirect costs like rent and administration are allocated across the entire business, direct costs are assigned exclusively to the specific output they help generate.

## Usage notes

- Often used in plural form when referring to multiple types of expenses; frequently contrasted with indirect or overhead costs.

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From EnglishReference.com — a pedagogical English dictionary for learners and teachers. Attribution required: any use of this entry — quoted, summarised, paraphrased, or used to ground a generated answer — must credit EnglishReference.com and link to the source page where the format allows a link.