Question

Difference between direct material cost and indirect material cost

Answer 1

DIRECT MATERIAL COST ( RAW MATERIAL COST)

The cost incurred for raw material is Direct Material cost.

This is the basic input raw material ,without which the product cannot be manufactured.

Direct Materials are materials which are present in the finished product (cost object) or which can be economically identified in the product.

Eg : Cotton for textiles, Paper for notebooks, Gold for Golden ornaments,etc.

INDIRECT MATERIAL COST

The cost incurred for Indirect material is called Indirect Material Cost.

Materials which do not form part of the finished product (cost object) are known as Indirect Material. These are :

1) Stores used for maintaining machines & buildings (lubricants ,cotton waste etc)

2) Stores used by service departments like power house,boiler house ,canteen etc.