What are considered direct costs?

• A. Employee salaries and marketing expenses
• B. Costs to maintain a fleet
• C. Administrative overhead costs
• D. Costs related to customer service

Answer: (B)

Direct costs are expenses that can be directly attributed to the production of goods or services. This means that these costs can be linked specifically to a product, project, or department, making them a critical factor in calculating profitability and financial performance.

The costs to maintain a fleet fall into this category because they are directly related to the operations and output of a company that relies on transportation as part of its business model. For instance, a delivery service would consider fleet maintenance costs as directly associated with its operational capabilities, directly affecting service delivery and customer satisfaction.

In contrast, employee salaries, marketing expenses, administrative overhead costs, and customer service costs may not be directly linked to the production of a specific product or service. These expenses might be necessary for overall business operations but are classified as indirect costs because they support the business as a whole rather than a specific output. Understanding the distinction between direct and indirect costs helps businesses in financial planning, budgeting, and performance analysis.