Direct Costing

Direct costing, also known as variable costing, is a method in cost accounting that focuses only on the direct costs associated with producing a product, such as materials and labor. It excludes fixed costs like rent and salaries from product costs. This approach helps businesses understand how much each product truly costs to make, allowing for better pricing and profitability analysis. By focusing on variable costs, companies can make informed decisions about production levels and identify which products contribute most to profits.