Direct materials are the raw materials that are used in the manufacturing process and can be directly traced to the finished product. These are materials that are an essential part of a product and constitute a significant portion of the total cost of producing the product.
For example, in the production of a car, the steel used for the body, the glass used for the windows, and the rubber used for the tires would all be considered direct materials. Similarly, in a bakery, the flour, sugar, and eggs used in making bread would be direct materials.
It’s important to note that direct materials do not include indirect materials, which are materials used in the production process that cannot be easily traced to a specific product or do not constitute a significant portion of the production cost. Examples of indirect materials might include cleaning supplies or small tools used in a manufacturing plant. These costs are often grouped into “overhead” or “indirect costs.”
Direct materials, along with direct labor and manufacturing overhead, make up the total manufacturing cost of a product.
Example of Direct Materials
Let’s consider the example of a furniture company that manufactures wooden tables.
In this case, the direct materials would include:
- Wood: This is the primary material used to create the structure of the table. The cost would be significant and directly proportional to the number of tables produced. More tables mean more wood is needed.
- Nails and Screws: These are used to assemble the different pieces of wood into a table. Their cost would be directly linked to the number of tables produced.
- Paint or Varnish: This is used to finish the tables, giving them a polished look and protecting the wood. Again, the more tables produced, the more paint or varnish required.
In this scenario, these materials can be directly traced back to the finished product (the table), and the cost of these materials is a substantial part of the total cost of the table. Therefore, they are classified as direct materials.
On the other hand, the cleaning materials used to clean the manufacturing area, or the small tools for routine machine maintenance, are considered indirect materials. These cannot be specifically traced back to each table manufactured and are therefore not considered direct materials.