Direct Materials 

Direct Materials are those materials which can be identified in the product and can be conveniently measured directly charged to the product to the product. Thus, these materials directly enter the production and form a part of the finished product. For example, timber in furniture making, cloth in dress making and bricks in building a house. The following are normally classified as direct materials.

(i) All raw materials like jute in the manufacture of gunny bags. Pig iron I foundry, and fruits in the canning industry.

(ii) Materials  specifically  purchased for a specific job, process or order like glue for bookbinding, starch powder for  dressing  yarn etc.

(iii) Parts of components  purchased or produced like batteries for transistor  radios and tires for cycles .

(iv) Primary packing materials like cartons, wrappings, cardboard boxes, etc. used to protect finished from climatic conditions or for easy handling inside the factory.

From the above discussion, it becomes clear that indirect materials boxes. Etc. used to cannot be classified as direct materials. An example of indirect materials is consumable like of fixed assets, high-speed diesel used in power generator etc.

Classification of materials into direct and indirect facilitates materials . Direct materials are usually high-value items as compared to indirect materials and need strict control and critical analysis for reducing their cost. On the other hand, simple control techniques are sufficient in the case of indirect materials being low-value items.

However, in some cases, through the materials  is a part of the finished product yet it is not treated  as direct materials ; for example , sewing thread in dress making and nails in furniture making. This is because they are used in comparatively small quantities and it would be futile elaboration to make an analysis of them for them for the purpose of direct charge. Such material  is treated as indirect materials . Thus, it can be concluded that the ease and the feasibility with which a material can be traced into the compositions of a finished product will determine what Is to be treated as direct material.

Leave a Reply

Your email address will not be published. Required fields are marked *


Related Posts

Evaluation of Transfer Pricing Policies
Introduction When one department of company manufactures some product which is supplied to another department of the company, transfer pricing i...
What is financial reconstructing
When a company cannot pay its cash obligations - for example, when it cannot meet its bonds payment or its payments to other creditors it goes ba...
Coffee Maker's Incorporated (CMI) - Transfer Pricing Example
Coffee Maker's Incorporated (CMI)Two divisions of a CMI are involved in a dispute. Division A purchases Part 101 and Division B purchases Par...
powered by RelatedPosts