Direct material costs

Last updated: 26.03.2016

Direct material costs are together with direct labor costs and possibly direct expenses part of direct (prime) costs. As being their part, they are directly and clearly identifiable with cost object (usually product or service). That means they are the costs DIRECTLY associated with the production process of specific product.

Examples of direct material costs: cost of raw materials, parts and components used to manufacture and complete the product and basic packaging

 

Because the production differs from industry to industry, or even from business to business it is difficult to prepare a detailed list of direct material costs. There are usually only a several general lists and definitions (see e.g. above) which can help to comprehend their meaning. Therefore, the final detailed classification is up to the entity.

 

More about direct costs and their booking here.



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