What are the costs associated with two or more business units called?

Variable costs fluctuate with production levels and are directly tied to specific business activities or units. Examples include raw materials and direct labor costs related to manufacturing products. Since variable costs are directly linked to the output of a specific unit, they do not encompass costs shared across multiple units.

Direct costs can be traced directly to a specific business unit or product, such as raw materials or labor directly involved in production. Because they are attributable solely to one unit, they do not represent costs that are shared among two or more business units, which is the defining feature of indirect costs.

Product costs include all costs associated with manufacturing a product, including direct materials, labor, and allocated overhead. While product costs may include some indirect costs, they primarily refer to expenses that can be linked directly to the creation of a specific product rather than costs shared across multiple business units.