Direct materials are any materials that are used to make a product that is manufactured for sale. Direct materials are also called "raw materials." Examples of direct materials include wood that is used to build furniture, ingredients that are used to make food and fabric that is used to make clothing. The labor required to make products is not a direct material, but it is referred to as "direct labor."Continue Reading
For something to be considered a direct material, it must be something that can be quantified so the business can track expenditures. For example, the amount of wood required to make an entertainment center can be calculated and the cost can be determined. However, the use of wood glue is harder to quantify. Consequently, the materials that are difficult to quantify fall into a subcategory of direct materials called "indirect materials."
Direct and indirect materials are not counted as part of a business' overhead. The overhead is things like rent, building maintenance and the cost of machines required to process raw materials. Calculating the cost of sales determines whether the cost of a finished product is adequate to cover the costs of the direct and indirect materials, direct labor and overhead.Learn more about Building Materials