Material Costs - Cost Accumulation
However 'Materials' refer to the tangible inputs into the procedure of producing useful output. They might be indirect materials or direct materials or overheads as like an example of, to produce tea, tea-leaves are the material or as input.
Material Cost Classification
Material costs may be classified as like:
a) Direct Material Cost: it refers to costs of materials such may readily be identified through output units. The cost of timber utilized in the manufacture of a chair is as an example of, a direct material.
b) Indirect Material cost: it refers to items of raw materials for that it would be difficult and or inefficient to attempt to charge directly to exact cost units. As like an example of, the glue employed to bind the joints in the assembly of a chair
Some other examples of indirect materials involve as:
- Materials employed by service departments as an example of, spare parts used through maintenance department in servicing plant and repairing and machinery
- Materials employed by non production functions as like an example of stationary employed in accounting department