Direct Material Cost

What is a Direct Material Cost?

Direct material cost is the cost of all the identifiable materials used in the manufacture of a product. To be identifiable, the materials must be easily tracked, measured and allocated to a unit product for them to be classified as a direct material cost, if not then they are termed an indirect material cost.

For example, wood is a direct material cost of making furniture. It is easy to keep track of the amount of wood used in the production of a piece of furniture.

However, other materials are also used such as glue, the glue is an insignificant cost compared to the wood and it would not be easy or worthwhile to measure the amount of glue used in each item produced. So in this instance, the glue would be regarded as an indirect material cost.

For further information on direct material cost see see the Wikipedia definition.

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Last modified March 23rd, 2016 by Team

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