Direct costs are linked to a product, department or region within a business.
Direct product costs such as raw materials are variable costs.
In the case of a printing business this would include the ink and the paper.
It would also include hourly paid labour.
Variable product costs increase in total as more units of products are manufactured.
Costs that are direct to a department could be variable or fixed.
For example, a supervisor in the printing department would be a direct cost to the printing department.
Since the supervisor's salary is likely to be the same amount each month regardless of the quantity of products manufactured, it is a fixed cost to the department.
A direct product cost is the electricity used to operate a printing machine. The cost of the electricity is variable because the total electricity used is greater when more products are manufactured on the machine.
Depreciation on the printing machine is also a direct product cost, except it is usually a fixed cost.
