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Buyers should have the ability to analyse the costs of their purchases not only for determining their impact to their organisation's cost but also for the purpose of reducing them during commercial negotiations to contribute to the profitability of their organisation. One way of analysing costs is to classify them into direct and indirect costs. Which ONE of the following is an explanation of 'direct costs'?
Correct Answer: B
Direct costs are expenses that can be clearly attributed to the production of specific goods. These typically include raw materials, direct labor, and other costs tied directly to the manufacturing process. They are variable with production volume and help procurement teams analyze pricing more effectively during negotiations. Reference: L4M5 Commercial Negotiation 2nd edition (CORE), Section 2.1 - Direct and Indirect Costs