How does direct and indirect costs help in a negotiation

It helps a buyer understand the true costs associated with production of the item they are buying (eg wages of the production staff rather than wages of its admin staff) as buyers are not interested in the indirect costs, they are unnecessary overheads.

This depend on what you want to achieve in your negotiation. Indirect costs would be your variable if you want to highlight or not during negotiation. It can magnify the value of what you represent if well presented behind your direct costs or you may want to hide it if you think it would appear as a weakness or liability in your overall negotiation.