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Direct costs: These are the elements that are directly spent on the production unit and are the elements that can be allocated directly to the production unit. The unit's share can also be determined directly. Indirect costs: Those elements that are not directly related to the production unit and can not be directly allocated to production. The product share of these costs can be determined by loading rates.
Direct cost is the one which can be related to product directly, like, if you are making a chair, then, yo can calculate how much wood you have used. This cost will become the direct cost.
Indirect cost is the one, which can not be directly calculated but it relates to a product like the salary of production supervisor.
