Q.What is meant by 'material'? Distinguish between Direct Material and Indirect Material with examples.

Material is the physical substance a business buys and consumes to make its products, and for costing it is split by whether its cost can be traced to a specific product.

Material means any commodity — raw material, component, consumable store, spare part or packing material — purchased and held for use in production and forming part of the cost of output. Direct Material becomes an identifiable part of the finished product and its cost can be conveniently traced to a unit (e.g. cloth in a shirt), while Indirect Material does not form an identifiable part, or is too small to trace, and is charged to overheads (e.g. lubricating oil, glue).

Meaning of material: Material means any commodity or substance — raw material, component, consumable store, spare part or packing material — that a business purchases and holds for use in production or in rendering a service, and which forms part of the cost of the finished output. In most manufacturing concerns material is the single largest element of cost, which is why its purchase, storage, issue and control receive such close attention.

Direct Material vs Indirect Material:

Direct Material is the material out of which the product is chiefly made and whose cost is large enough and clear enough to charge straight to the product. Indirect Material either does not physically remain in the product, or is so small in value per unit that tracing it to each unit would cost more than it is worth — so it is pooled into overheads and absorbed into cost along with other indirect expenses.

Students often decide direct/indirect purely by whether the material is 'important' — the real test is TRACEABILITY to a unit of product. Nails and glue physically remain in furniture, yet they are Indirect Material because their tiny per-unit cost cannot be conveniently traced.