ECONOMICS

Detailed explanation-1: -The reason we separate direct costs from expenses in your forecast is simple: Direct costs affect the profit margin of your product or service. Expenses affect the profit margin of your company as a whole.

Detailed explanation-2: -Direct costs are the expenses a business incurs directly to make a product or service, or buy a wholesale product for resale. (All other costs are considered to be indirect costs.)

Detailed explanation-3: -Direct costs (also known as costs of goods sold-COGS) are the costs that can be completely attributed to the production of a specific product or service. These costs include the direct expenses for materials used to create the product, and potentially any labor costs that are exclusively used to create the product.

Detailed explanation-4: -A cost typically refers to the price paid to acquire an asset, while an expense is an ongoing expense, such as an employee’s salary or rent on a retail space.