Lesson: Direct Costs

In this lesson, Nick Palazzolo, CPA, demystifies the concepts related to direct costs within the realm of accounting. With his engaging approach, he breaks down what constitutes direct materials and direct labor, contrasting them with indirect expenses to provide a clear understanding of how each type of cost is allocated in a business setting. Using relevant examples, such as the differences between a factory floor sweeper’s wages and a worker producing goods, Nick clarifies how direct costs impact the computation of cost of goods manufactured. Moreover, he delves into prime and conversion costs, ensuring that the intricacies of these formulas are accessible. Nick also offers insights into the nuances of product and period costs and their implications for financial statements. By lesson's end, students are equipped with the algebraic skills necessary to piece together these cost components and understand their influence on the cost of goods sold.