Direct materials cost

Direct materials cost

Direct materials cost is the cost of direct materials which can be easily identified with the unit of production. For example, the cost of glass is a direct materials cost in light bulb manufacturing[1].

The manufacture of products or goods required material as the prime element. In general, these materials are divided into two categories. These categories are direct materials and indirect materials[2].

Direct materials are also called productive materials, raw materials, raw stock, stores and only materials without any descriptive title.

Direct materials cost estimation

Steps to estimate the direct material costs[3]:

  1. Find the total amount to be produced. This is usually noted as the order size.
  2. Calculate the total amount of raw materials required to produce the order size.
  3. Multiply that amount by the cost associated with the raw materials.
  4. If there is a waste or scrap, its cost should be added to the costs in step 3.
  5. If the waste or scrap can be sold at salvage value, this value should be subtracted from the costs in step 4.


See also

References

  1. ^ Lanen, W. N., Anderson, S., Maher, M. W. (2008). Fundamentals of Cost Accounting, McGraw Hill, ISBN 9780073526720
  2. ^ Michael R. Kinney, Cecily A. Raiborn, Cost Accounting: Foundation and Evolution, 7th edition
  3. ^ Phillip W. Gillet, Jr., J.D. notes, Chapter three

Wikimedia Foundation. 2010.

Игры ⚽ Нужно сделать НИР?

Look at other dictionaries:

  • direct materials cost — Expenditure on direct materials It is one of the cost classifications that make up the direct cost of a cost unit and is ascertained by collecting together the quantities of each material used on each product by means of materials requisitions… …   Big dictionary of business and management

  • direct materials cost — Expenditure on direct materials. It is one of the cost classifications that make up the prime cost of a cost unit and is ascertained by collecting together the quantities of each material used on each product by means of materials requisitions… …   Accounting dictionary

  • direct materials — UK US noun [plural] PRODUCTION ► things that are used in making a product that become a part of that product when it is finished: »Direct materials include the raw materials and components used in manufacturing. »The first step in determining a… …   Financial and business terms

  • standard direct materials cost — In standard costing, a standard cost derived from the standard quantity of materials allowed for the production of a product and the standard direct materials price for the materials specified for that product …   Accounting dictionary

  • standard direct materials cost — In standard costing, a standard cost derived from the standard quantity of materials allowed for the production of a product and the standard direct materials price for the materials specified for that product …   Big dictionary of business and management

  • direct materials — Materials that are directly incorporated in the final product or cost unit of an organization. For example, in the production of furniture, direct materials would include wood, glue, and paint. Compare: indirect materials …   Accounting dictionary

  • direct materials — Materials that are directly incorporated in the final product or cost unit of an organization. For example, in the production of furniture, direct materials would include wood, glue, and paint. Compare indirect materials …   Big dictionary of business and management

  • direct materials total cost variance — A combination of the direct materials price variance and the direct materials usage variance; it compares the actual cost and the standard cost of the direct material consumed in carrying out the actual production. The formula for this variance… …   Accounting dictionary

  • materials cost — The expenditure incurred by an organization on direct materials or indirect materials The expenditure on direct materials is part of direct cost of sales and that on indirect materials is a manufacturing overhead …   Big dictionary of business and management

  • direct materials price variance — In a standard costing system, a variance arising as part of the direct materials total cost variance. There are two alternative points at which the materials price variance may be established: when the material is purchased or when it is issued… …   Accounting dictionary

Share the article and excerpts

Direct link
… Do a right-click on the link above
and select “Copy Link”