Cost Accounting

Direct Materials- Meaning and Examples

Direct Materials are those materials that can be identified in the product and can be conveniently measured directly charged to the product to the product.

Thus, these materials directly enter the production and form a part of the finished product. For example, timber in furniture making, cloth in dressmaking and bricks in building a house. The following are normally classified as direct materials.

(i) All raw materials like jute in the manufacture of gunny bags. Pig iron I foundry, and fruits in the canning industry.

(ii) Materials specifically purchased for a specific job, process or order like glue for bookbinding, starch powder for dressing yarn etc.

(iii) Parts of components purchased or produced like batteries for transistor radios and tires for cycles.

(iv) Primary packing materials like cartons, wrappings, cardboard boxes, etc. used to protect finished from climatic conditions or for secure handling inside the factory.

From the above discussion, it becomes clear that indirect materials like boxes etc. cannot be classified as direct materials. An example of indirect materials is consumable like fixed assets, high-speed diesel used in power generators etc.

direct materials meaning and examples

Classification of materials into direct and indirect facilitates materials. Direct materials are usually high-value items as compared to indirect materials and need strict control and critical analysis for reducing their cost. On the other hand, simple control techniques are sufficient in the case of indirect materials being low-value items.

However, in some cases, the material is a part of the finished product, yet it is not treated as direct materials; for example, sewing thread in dressmaking and nails in furniture making. This is because they are used in comparatively small quantities and it would be futile elaboration to analyse them for the purpose of direct charge. Such material is treated as indirect materials.

Thus, it can be concluded that the ease and the feasibility with which a material can be traced into the compositions of a finished product will determine what is to be treated as direct material.

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