Direct materials are those materials and supplies that are used in the production of a product and are specifically related to that product.
What are direct materials?
- The tangible components of a product are known as direct material. The direct components for a baker, for instance, would be flour, eggs, yeast, sugar, oil, and water. In cost accounting, where this expense is specifically categorized in various forms of financial analysis, the direct materials concept is applied.
- Direct materials are included in the total cost of goods produced, which is divided into the cost of goods sold and ending inventory (which are shown on the income statement).
- Raw materials and subassemblies are both considered direct materials because they are physically present in finished products. But direct materials don't go as far as that.
- The quantity of scrap and spoilage that is typically encountered during the production of goods is also included in the term "direct materials. If excessive amounts of scrap and spoilage are encountered, they are viewed as production costs rather than as materials that are directly linked to a product.
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