What is a direct cost?

A direct cost is defined as an expense that can be directly traced to the production of a specific good or service. This means that the cost can be specifically identified with the cost object, which is often a product, project, or department. For example, materials used in manufacturing a product or labor that is involved directly in the production process are considered direct costs.

When looking at the other options, marketing expenses are typically categorized as indirect costs since they are not directly tied to the production of a specific product. Overhead costs, on the other hand, encompass various business operations expenses that cannot be directly allocated on a per-product basis, such as utilities and rent, thereby classifying them as indirect costs as well. Similarly, financial costs that do not relate to the production process also fall into the indirect category, as they do not correspond with the direct creation of goods or services. Therefore, the correct answer clearly aligns with the principle that direct costs are specifically tied to production activities.