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Differentiate between direct and indirect materials. What two qualities must be present to classify a cost...

  1. Differentiate between direct and indirect materials.
  2. What two qualities must be present to classify a cost as a direct material?
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Answer #1

1) Direct material refers to those material that can be are identified easily, measured conveniently and directly traced to the production cost. In order to be classified as direct materials the materials are required to qualify the two qualities. These are that the raw material inputs should be the integral part of a finished item and must be traced simply into it.

Indirect material refers to those materials that cannot be identified conveniently and allocated to the cost unit or cost centre. These are are minor items used in the production while creating the item out of the direct (major) materials

2) In order to be classified as direct materials the materials are required to qualify the two qualities. These are:

-- Materials should integral part of the finished item

-- Materials must be a significant portion of the total product cost

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