At the extreme of directly traceable costs are those items that can be physically or
contractually identified as components of the finished unit of product. For example, the
unit can be examined, weighed, and measured to find the type and quantity of each raw
material and component part incorporated in it, and royalty or patent license agreements
can be read to find what fee is owed to a patent holder for permission to manufacture the
unit. These are the clearest examples of direct costs.