Examples of direct expenses
Remember, every business is different. So, not all of these examples will apply to your company.
raw materials
sales commissions
manufacturing supplies
direct labor
customer service
purchase of goods to be sold
transit of goods from the supplier
If you can’t figure out if something is a direct cost, ask yourself if you can assign it to a specific product, service, customer, or project. If you can, then it’s likely a direct expense.
Because direct expenses are tied to something specific, they can vary from month-to-month depending on how many products you sold or how many projects you worked on. They can help you decide on a price for your goods that ensures you’re covering your costs.
Monitor your direct costs because dramatic changes might signify that it’s time to renegotiate rates with a supplier or to start looking for a new vendor.
Examples of indirect expenses
Like our direct expense examples, some of these indirect expenses may not apply to your company.
salaries
facility insurance
equipment depreciation
equipment maintenance
rent
utilities
office supplies
advertising
marketing
printing and stationery
legal fees
HR costs
health insurance
transit of goods to a customer
If you’re having a hard time assigning an expense to a specific product, service, customer, or project, it’s probably because it is an indirect expense. Although they’re not related to a particular product or service, it’s often necessary to incur indirect costs to ensure your business runs smoothly.
