Direct business expenses attributable to an Indirect cost
Direct cost is a direct cost that is not attributable to an Indirect cost group. Indirect costs are costs that are indirectly attributable to an Indirect cost object. For instance, if you need new carpet in your home and you shop for carpet at a retail store, the carpet cost is an indirect cost. The cost of the paper you used to print your manual about the best carpets for your home is an indirect cost. Your labor, such as getting up early in the morning to move the carpet and cleaning it afterwards, is an indirect cost.
Direct costs are those costs that are not attributable to an Indirect cost group. Direct costs include items like postage, utility bills, newspapers, library materials, and other items that can be purchased and that have a direct monetary benefit to the business. Some indirect costs that can also be categorized as a direct cost can also be classified as an indirect cost. Initial delivery, special deals on orders, and discounts on products are examples of indirect expenses that are classified as direct expenses.
Direct business expenses include those that are incurred to purchase a tangible item and that are normally incidentals, such as the cost of purchasing coffee. Although many businesses use an overhead rate to classify costs, determining a direct cost is not straightforward. There are so many factors that must be considered. For instance, did you order the coffee on your credit card, or did you pay a deposit to get the coffee? This type of classification is often difficult because it requires a judgment call by the company's accountant and the customer's CPA.