Bill of materials

Bill of materials is a structured, hierarchical list of all raw materials, components and sub-assemblies needed to make one unit, with quantities specified; it defines standard material inputs and authorises materials requisitions in.

ByHoang TruongUpdated July 3, 2026

See it move

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A bill of materials specifies every component a finished product needs and the quantity of each. An office chair's BOM might call for one seat cushion at €12.00, one steel frame at €22.00, and five castors at €1.20 each. Multiplying each quantity by its standard price and summing gives a standard materials cost of €40.00 per unit.

Where it fits

SubjectCost AccountingCoreTopicProduct Costing & Cost of Goods ManufacturedCoreTopicJob & Process CostingCore

The formula

LaTeX

\text{Standard materials cost} = \sum_{i} q_{i} \times p_{i}

Variables

$q_{i}$: Standard quantity of component i required per unit of finished product, as specified in the BOM (physical quantity unit (kg, litres, piec)
$p_{i}$: Standard purchase price per unit of component i (€ per quantity unit)

The basis of the materials line on a standard cost card; a materials usage variance arises when actual consumption per unit of output differs from BOM quantities.

Check yourself

PracticeCORE

A cosmetics company produces moisturisers using a standard bill of materials. During April, production of 5,000 units consumed 10 per cent more emulsifier than the standard quantity specified in the BOM. What is the primary cost accounting consequence?

Select an answer to check your understanding.