What type of cost is 'Freight Out' considered?

'Freight Out' refers to the cost incurred by a business for shipping goods to customers. This expense is directly associated with the sales of products and is necessary for delivering goods. In accounting, costs are often categorized into direct and indirect costs based on their relationship to the products sold or the service rendered.

A direct cost is one that can be directly traced to specific goods or services. Since 'Freight Out' is incurred specifically when products are sold and shipped to customers, it is classified as a direct cost. This means that it can be directly attributed to the revenue generated from sales, making it a variable cost closely tied to sales volume.

In contrast, operating income pertains to the profit derived from primary operating activities, while indirect costs are those expenses that cannot be traced directly to a specific product or service, such as rent and utilities. Capital costs involve expenses incurred to acquire or upgrade physical assets, which do not apply to shipping costs. Thus, classifying 'Freight Out' as a direct cost highlights its role in the overall costing structure of selling goods.