Direct Cost

Direct Cost refers to expenses in foreign trade operations that are directly related to a specific product, order, or project and can be clearly traced to a cost object, such as raw materials, direct labor, depreciation of production-specific equipment, export packaging costs, and commissions for a specific order. Its main use scenarios include: quotation calculation (e.g., FOB, CIF price composition), cost control, profit analysis, transfer pricing, and customs valuation. Notes: Direct Cost is contrasted with Indirect Cost (e.g., administrative expenses, shared utilities, freight shared by multiple orders); the key distinction lies in whether it can be directly attributed to a certain cost object. Direct costs usually vary with business volume, but not all variable costs are direct costs (e.g., sales commission paid by sales volume can be regarded as a direct cost, while production electricity charged by electricity usage is indirect if it cannot be attributed to a single product). Difference from 'variable cost': direct cost emphasizes traceability, while variable cost emphasizes change with output; the two may overlap but are not completely equivalent. Difference from 'prime cost': prime cost = direct materials + direct labor, which is a subset of direct cost. In foreign trade quotations, direct costs must be accurately accumulated to avoid omission or overestimation, otherwise pricing competitiveness will be affected.