--- title: Direct Costs description: promotion costs vs. production costs --- [LERN Club Sign-In](http://beta.lern.org/club/) [![lern-logo.png](https://blog.lern.com/hubfs/June-folder/lern-logo.png "lern-logo.png")](http://lern.org) ** # Questions # Direct Costs Sep 13, 2019 8:41:53 PM by Jordan Kivley | **Q:** I’m in the process of preparing targets for the operating margins for our various programs and have 2 questions related to direct expenses: 1. What promotion expenses should I be including in direct program expenses? Our promotion expense budget is centralized. Production of our catalogues (3 per year) is our largest promotion expense and we currently allocate the cost of producing it to each program based on the number of pages the program takes up in the catalogue. We also have the cost of advertising through social media, radio spots, and newspapers/magazines included in our promotional costs. Should these costs be allocated to programs as direct expenses or should they be considered overhead? 2. Should travel and hotel expenses for instructors be included in direct expenses for our professional development and corporate training programs? We will be taking a number of our programs “on the road” this year to deliver them in other cities and provinces. What about the program manager’s travel and hotel expenses if he/she travel to the sessions also. Should it be considered a direct expense?   **A: **Direct costs consist of two components of your expenses:  Promotion costs and Production costs. The promotion costs are those costs you incur for printing and mailing your brochure and any other paid advertising or promotion. In this case, you should include your social media ads, radio spots, newspaper and magazine ads as part of promotion. Production costs are those costs you incur in offering the course. These would include any rental costs for space and instructor costs, as well as any supplies or materials you pay for. Generally, the largest component of production cost is teacher compensation. Travel and hotel expenses for instructors should be included in your production costs. This means it would be a direct cost. When you are planning your budget, you need to determine your fixed (direct costs) in order to set your income budget goals. If there are required travel and hotel costs for instructors, this is absolutely part of your production cost. If the program manager is traveling to the instructional site, and it is a necessary expense in order to offer the course, then it would be a production cost as well.  Otherwise, it would be included in your general and administrative expenses, but you would need to set budget goals that would allow you to generate sufficient operating margin to cover these costs. ### Posts by Tag - [Marketing (34)](https://blog.lern.com/member-questions/tag/marketing) - [brochures (29)](https://blog.lern.com/member-questions/tag/brochures) - [continuing education (26)](https://blog.lern.com/member-questions/tag/continuing-education) - [brochure distribution (22)](https://blog.lern.com/member-questions/tag/brochure-distribution) - [print brochure (21)](https://blog.lern.com/member-questions/tag/print-brochure) - [brochure mailing (20)](https://blog.lern.com/member-questions/tag/brochure-mailing) - [pricing (19)](https://blog.lern.com/member-questions/tag/pricing) - [Instructor pay (16)](https://blog.lern.com/member-questions/tag/instructor-pay) - 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