Direct materials

Definition

Direct materials are raw materials that can be directly traced to the production of a specific product. These materials are essential components in manufacturing and are included in the cost of goods sold.

5 Must Know Facts For Your Next Test

1. Direct materials are one of the three major components of product costs, alongside direct labor and manufacturing overhead.
2. The cost of direct materials is easily traceable to individual units of production.
3. Examples include wood for furniture, fabric for clothing, and steel for automobiles.
4. In job order costing systems, direct material costs are assigned to specific jobs or batches based on actual usage.
5. Proper management and tracking of direct materials can significantly impact a company's profitability.

Review Questions

• What distinguishes direct materials from indirect materials in manufacturing?
• How are direct material costs assigned in a job order costing system?
• Why is it important for companies to accurately track their direct material usage?

Related terms

Direct Labor:

Wages paid to workers who can be directly involved in the production process.

Manufacturing Overhead:

All indirect costs associated with manufacturing, such as utilities, maintenance, and depreciation.

Job Order Costing:

A costing method that assigns costs to specific jobs or batches based on actual consumption of resources.