What are Direct Materials?

Direct materials are raw materials or components that are directly used in the production of goods or services. They are essential for the manufacturing process and can be directly traced to the final product. Examples of direct materials include steel in car manufacturing, fabric in clothing production, or flour in the production of baked goods.

Direct materials are a key component of cost of goods sold (COGS) in manufacturing and production industries. The costs associated with direct materials are considered variable costs, as they fluctuate based on the volume of production. Accurately managing direct materials is crucial for maintaining cost control and profitability in the supply chain and procurement process.

In financial accounting, direct materials are distinguished from indirect materials, which are materials used in the production process but cannot be traced directly to specific products, such as lubricants for machinery or cleaning supplies.