Direct costs
In one sentenceCosts that can be traced easily and accurately to a specific product, order or project, such as the materials that go into it and the wages of workers who work on it directly.
Simply put
If you can say with confidence, “this amount was spent for this specific project,” then it is a direct cost and is charged to it in full.
In contracting, for example, site materials, site workers and equipment rented for the project are direct costs, but general management salaries are not.
Worked example
A contracting business calculates the direct costs of a single villa project.
Building materials for the site200,000 SAR
Site worker wages80,000 SAR
Equipment rented for the project20,000 SAR
Project direct costs = 200,000 + 80,000 + 20,000300,000 SAR
Don't confuse it with
Indirect costsThey serve more than one project and are linked to any one of them only through an estimated allocation.