What Is Direct Cost And Indirect Cost

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When talking about marketing tools, two of the most important factors to talk about are cost and access. Although cost is often discussed first, it should not be the last consideration when making business decisions. As a matter of fact, cost is often what is called a catch all term that encompasses several different types of costs. It is important for the business to understand all three in order to make sound marketing decisions.

The direct cost or price element includes everything from postage to paper, ink, electricity, phone bills, transportation and delivery. Some businesses try to cut costs here by using postage discounts or buying their supplies in bulk, but these tactics are only a quick fix. Instead, what is needed is a long term solution that will eliminate or greatly reduce indirect costs and increase profit over time. In the case of what is direct cost and indirect cost, the solution is cost reduction.

Indirect costs include market research, distribution costs, marketing equipment, distribution costs, utility costs, government fees, and of course, employee payroll. Each of these represents a loss that can quickly add up when they are incurred. A good example of this is purchasing software for your network rather than making your own.

Direct cost, on the other hand, refers to what is referred to as the cost of doing business. It includes everything that costs you money directly including expenses such as wages, salaries, vehicle maintenance and repair, interest, property taxes, etc. All of these cost money. However, indirect cost is what makes your business what it is. It is what allows you to sell products and services to customers at a profit over time.

Many factors go into determining what is direct cost and indirect cost. These factors include demand, price, competition, timing and the willingness of customers to buy. All of these factors make up the market place and determine what is direct cost and indirect cost. For example, if there is strong demand for a product, then the price will go up. If you price your product below the demand, then you will be able to save money in what is called the cost of sale.

Some of the most common items used in what is direct cost and indirect cost are gasoline, food, personal computer, electricity, home improvement products, medical bills, etc. Each of these items has its own particular set of direct and indirect costs which must be considered before you decide what is direct cost and indirect cost for your particular product or service. There are many factors involved which makes determining what is direct cost and indirect cost a difficult task. For example, consider what is travel cost when you have to fly from one place to another to attend a business conference in town.

The next question that you may have is what is the direct cost and indirect cost for groceries? The answer is that the cost of shipping the product to your home is what is direct cost and the cost of making the product at home is what is indirect cost. Another example is what is indirect cost and direct cost for automobiles. Indirect cost is what is spent on advertising and direct cost is what is spent on the vehicle itself. Many of these examples will depend on the competition between the two products.

The next time you are asking what is the direct cost and indirect cost for what is the cost of doing business, remember that every dollar counts when it comes to the bottom line. To keep costs down in the current tough economy, every business must be proactive in determining what is a direct cost and indirect cost and how those costs are going to affect the business. The good news is that if you take advantage of some of the many tools and resources that are available to help you manage your business costs you can be sure to save money in the long run and stay competitive in the market.