Press "Enter" to skip to content

Difference between direct & indirect expenses

5impledev 0

Running a business is not easy. With the economy on a downward spiral, it has become even more challenging to make ends meet. Every penny spent needs to be turned over twice before it is paid out.

The goal of any business, after all, is to make judi online money. Keeping tight reigns on your business and the expenses incurred is vital. If you don’t, you could end up owing more than your actual income.

That is not a situation that any business longs to be in.

Profit is the name of the game.

In this article, we’ll discuss direct and indirect expenses in the business. Read more to understand what is the difference between these two with some examples.

What Are Direct Expenses?

In short, a direct expense is an expense that is related to the purchase of products. Many companies are in the trade for resale, and they have to buy bulk stock to operate. Direct expenses would refer to anything that is related to what you have bought.

Companies that manufacture their own products will assign the costs of materials to direct expenses.

Direct expenses that need to be considered in any business are very much the same throughout. The cost of materials, freight, and import duties are a few of these. These will all affect the costing of the products sold.

You do need to factor the cost of staff wages into the equation too. If you are a re-seller, the staff is an expense incurred as they are required to offload and pack the products that you are going to resell.

The staff that you hire for the manufacturing process make the finished product possible. Their salaries become a part of the expenses against that product.

There are certain areas of direct expenses that will affect the price of products without a doubt. You may find that when fuel surcharges increase, so do the prices. This is a common occurrence and one that is unavoidable.

Companies can only carry the extra costs up to a point. Thereafter, they have no choice but to increase the sales costs.