Direct materials
Direct materials are the raw inputs that physically become part of a finished product and can be traced to individual units in an economically justifiable way.
Also known asDM · raw materials
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The formula card defines direct materials cost per unit as quantity used multiplied by unit price, with three components: DM (direct materials cost per unit), q (quantity of material per unit produced), and p (purchase price per unit of material). Direct materials must be physically traceable to individual units without excessive cost or effort; inputs too small or costly to track individually are classified as indirect materials within overhead. A worked example anchors the formula: a bakery using 0.3 kg of material at €1.20 per kg incurs a direct materials cost of €0.36 per loaf.
Check yourself
A furniture maker uses 2.4 metres of oak per chair. Each chair also requires a small amount of wood glue and a handful of finishing nails, but tracking the exact quantity of either to an individual unit would cost more than the insight gained. Which costs qualify as direct materials for the chair?