Direct Cost
Accounting glossary · Understand, connect, apply
A direct cost can be traced to a specified product, service, job or other cost object without an arbitrary allocation. Whether a cost is direct depends on what you are measuring.
Example
Timber costing 420 is issued specifically to a custom table order. It is a direct material cost of that order.
Remember the difference
Direct does not mean variable. A designer paid a fixed amount exclusively for one project can be a direct project cost. Identify the cost object before classifying the cost.
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Published 4 November 2026. Prepared with AI assistance; examples are fictional and simplified for learning.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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