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Wednesday, May 26, 2010

Two Types of Material - Direct and Indirect Material

In simple terms the word ‘Material’ refers to all commodities that are consumed in the process of manufacture.

Material can be defined as anything that can be stored, stacked or stockpiled. It constitutes an important part of the cost of production for nearly 60% of the cost of production of large number of organizations.

Types of Materials:

The materials can be categorized into two types:

a. Direct Material: The materials, which can be identified with the individual units, are known as ‘direct material’. These materials form part of the finished product. It may be raw material like wood used in making tables and chairs, Component parts used in a product ,e.g., tyres and tubes in a car, Any material used in primary packing of the products, like cans for tinned food and drink. All costs, which are incurred to obtain direct material, are known as ‘direct material cost’.

b. Indirect Material: Indirect materials do not form part of the finished products. Indirect material cannot be accurately allocated to a particular unit of product. Examples of such materials are: consumable stores, cotton waste and lubricating oils, required for the maintenance of machines, etc. 

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