Direct and indirect costs
A direct cost can be traced to one product or service without guessing; an indirect cost cannot. The dividing line is traceability, not size.
Direct cost = a cost traceable to one product or service | Indirect cost = a cost shared by several
Why it matters
Direct costs set the floor for what one sale must recover. Mixing the two kinds makes a product look more or less profitable than it is.
Where it appears in a CFO+ model
- In the cost lines that are consumed by what the activity sells, such as ingredients, materials, packaging or supplies.
- In the monthly fixed costs, which are mostly indirect.
Learn the concept in the Academy
Activities where it shows up
No figures are published: a definition and a formula only.