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Direct material cost is the cost of the raw materials and components used to create a product. The materials must be easily identifiable with the resulting product (otherwise they are considered to be joint costs). The direct material cost is one of the few variable costs involved in the production process; as such, it is used in the derivation of throughput from production processes. Throughput is sales minus all totally variable expenses. Examples of direct materials are: 1  The timber used to construct a house. 2  The steel included in an automobile. 3  The circuit board included in a radio. 4  The fabric used to assemble clothing.
Manufacturing and Nonmanufacturing Costs. Manufacturing (direct materials, direct labor, factory overhead) and non-manufacturing costs; product and period costs; raw materials, work-in-process and finished goods; cost of goods manufactured and cost of goods sold; cost accounting cycle.irect materials as a type of manufacturing costs. Direct materials are raw materials that become an integral part of the finished goods. Direct materials should be distinguished from indirect materials (part of overhead costs), about which we will talk later.