Thursday, May 7, 2015

Direct materials cost

Direct materials cost îs cost of direct materials which can be easily identified with unit of production, For example, cost of glass îs direct materials cost în light bulb manufacturing,

The manufacture of products - goods required material as prime element, In general, these materials are divided into two categories, These categories are direct materials & indirect materials,

Direct materials are also called productive materials, raw materials, raw stock, stores & only materials without any descriptive title,

Direct materials cost estimation

Steps to estimate direct material costs,

Find total amount to be produced, This îs usually noted as order size,
(1) Calculate total amount of raw materials required to produce order size,
(2) Multiply that amount by cost associated with raw materials,
(3) If there îs waste - scrap, its cost should be added to costs în step 3,

(4) If waste - scrap can be sold at salvage value, this value should be subtracted from costs în step 4,

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