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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.
1 Transportation: Transportation is a part of total direct materials cost. 2  Any change in the transportation expenses can change the total and per unit cost of direct materials available for use and can become the reason of favorable or unfavorable direct materials price variance.f the actual price paid for materials is more than the standard price, an unfavorable materials price variance occurs. On the other hand, if the actual price paid for the materials is less than the standard price, a favorable materials price variance occurs.