Final answer:
Direct costs are the costs directly incurred in the production of goods or services. The spread refers to the difference between the selling price and the cost of production. Underpricing is selling a product at a price lower than its cost of production.
Step-by-step explanation:
To understand the concepts of direct cost, spread, and underpricing, we can look at the breakdown of total costs into fixed and variable costs. Direct costs are the costs directly incurred in the production of goods or services, such as the cost of raw materials and labor. The spread refers to the difference between the selling price and the cost of production, and underpricing is selling a product at a price lower than its cost of production.