Direct Costs - How is direct cost calculated?

Q: How is direct cost calculated?

The direct cost margin is calculated by taking the difference between the revenue generated by the sale of goods or services and the sum of all direct costs associated with the production of those goods, divided by the total revenue.

Answer

A company's direct cost margin is its profit after deducting all direct production expenses from sales revenue. The formula for this margin is revenue minus total direct costs divided by total sales revenue.

Direct Costs - How is direct cost calculated?

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