 Hello, in this lecture, we will define direct costs. According to fundamental accounting principles, Wild 22nd edition, the definition of direct costs is costs incurred for the benefit of one specific cost object. When considering direct costs, we could consider them in relation to a manufacturing company, a manufacturing company that manufactures inventory, and then we can group our costs in that context in terms of direct costs and indirect costs. There's a few different ways we can group the costs when we're in a production process. This is one useful way. The direct costs will be those that can be directly applied to, in this case, the inventory. Support accounting instruction by clicking the link below, giving you a free month membership to all of the content on our website broken out by category further broken out by course, each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files, and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. Tori, like a tablet over here, those might include obviously the direct materials and the direct labor. When we're considering the manufacturing process, it becomes important for us to be able to apply costs to specific inventory in terms of, in this case, this tablet, a specific piece of inventory or a specific job, or to apply something out by process. And in order to do that, we can think about the types of costs that we can apply directly. Direct materials and direct labor are those the types of costs that whether we be using a job cost system or a process cost system, we can apply directly to the job or the process. Therefore, they're direct indirect costs are going to be those things that we cannot apply directly as easily to the job or process, and therefore have to use some other format. That other format is usually overhead that we will then apply out to specific units of inventory or specific pastries or specific processes in some other way. So when we think about overhead, those that's all the stuff that we're going to group together that we cannot really apply out to the job or the process directly and therefore have to put it in this other group. Anything that you think of that's in the manufacturing process that it says factory, but we can't apply it directly out. So if it's the depreciation on the factory or the rent on the factory or the maintenance of the factory, the upkeep of the factory, the machinery within the factory, if we can't apply it directly to the to the job, then it's going to go into overhead. Also things like small tools, if we have glue or something like that, obviously, those are directly involved in the end product like glue. But it might be too small for us to directly measure it in each of those end products and more efficient and cost effective for us to just dump it in the overhead and then apply it out in some other way to the specific job to the specific inventory in some other format using an estimate.