The $500 is not incidental damages because it is not an expense that Dixon incurs. Incidental damages are reasonable expenses incurred after a breach. Rather, the $500 is consequential damages.
ยง2-715(2) defines consequential damages as losses by the buyer (1) of which the seller had reason to know at the time of contracting, and (2) which "could not reasonably be prevented by cover or otherwise." Dixon's $500 loss meets both conditions.