Benefits Of Direct Material Materials Essay
1. Direct materials are traceable matter and all items that are required to assemble or manufacture a certain product. The direct material contained in a manufactured good may also be termed as a product cost, an inventory cost and prime cost.
2. Indirect materials are consumables like disposable tools and protective devices which are not used as raw material but which makes it possible to a production of goods and services in a more safe and efficient manner hence the materials can’t be linked to the specific product.
3. indirect labor is either service or production that is assigned to a certain product, work order or cost center. When a business gives service, direct labor is the labor of those people who give direct service to the customers.
4. Indirect labor involves any cost of labor that supports the process of production, but which isn’t directly involved in an active conversion of a specific material into a finished product. Employees like accountants, security guards and supervisors who don’t directly produce goods and services but contribute much in making production possible or even more efficient.
5. Manufacturing overhead involves factory operations; it includes cost incurred by the factory beside cost of direct materials and even labor cost. Manufacturing overhead pertains things like electricity used to run factory equipment (Whitecotton, 2016).
Contribution margin ratio can be defined as the difference between company’s sales and…