Other Direct Costs (ODCs) are direct costs that are not classified as direct labor, subcontractors, materials, or equipment, but are necessary costs to deliver on sales commitments.

Primary Implication

Do you have significant direct costs assigned here that should be managed within a unique subcategory?  If yes, allocating related costs to like accounts is better to improve your ability to manage these direct costs.  If not, thank those accountable for recording their transactions where they belong so that operations management can keep their focus on reducing the costs of your major direct costs.

Overview

If an expense varies with the volume of sales, or if it goes away entirely, if a product or service is discontinued, then this is a direct cost.  “Other” direct costs involve those costs directly attributable to operations but are not of significant size or frequency of purchase to warrant a unique direct expense category.

It is always better to allocate other direct costs directly to a specific job or product cost code.  If not directly assignable, other direct costs must be included in the direct expense allocation percentage used to derive your sales price.

Avoid frequently occurring and high dollar values in this subcategory—these should be in an individual sub-account.  The purpose of accounting for Other Direct Costs is to group small and infrequent direct costs that should be tracked with COGS in this subcategory to establish an accurate picture of your gross profit generated.