How is 'Delivery Expense' classified?

'Delivery Expense' is classified as a Direct Cost because it is a cost incurred in the course of delivering goods to customers as part of normal business operations. Direct costs are expenses that can be directly traced to the production or sale of specific goods or services. Since delivery expenses directly relate to the costs incurred in delivering products to consumers, they are recognized as direct costs on the income statement.

In most businesses, these costs are essential for generating revenue from sales, and they impact the overall profitability of the business. By classifying delivery expenses as direct costs, businesses can effectively assess their gross profit margin, as these expenses are subtracted from sales to determine the gross income derived from core business activities.