Direct costs are expenses that can be directly attributed to a specific project, product, or service. These costs typically include items like raw materials, labor, and manufacturing expenses that are necessary for producing a good or delivering a service. For example, if a company produces widgets, the costs of the materials used to make those widgets and the wages paid to workers directly involved in their production are considered direct costs. In contrast to indirect costs, which are not easily traced to a single project, direct costs provide a clear picture of the financial resources required for specific activities. Understanding direct costs is essential for businesses to accurately price their products and manage their budgets effectively.