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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.
DEFINITION of 'Direct Cost'. A price that can be completely attributed to the production of specific goods or services. Direct costs refer to materials, labor and expenses related to the production of a product.REAKING DOWN 'Direct Cost'. For example, the cost of meat in a hamburger can be attributed directly to the cost of manufacturing that product, as could the cost of packaging materials and preservatives. These are considered variable costs that are inconsistent and change amounts often.