direct materials cost

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Expenditure on direct materials. It is one of the cost classifications that make up the direct cost of sales of a cost unit and is ascertained by collecting together the quantities of each material used on each product by means of materials requisitions and multiplying the quantities by the cost per unit of each material. A percentage on direct materials cost is sometimes used as a basis for absorbing production overheads to the cost unit in absorption costing.

Subjects: Accounting.

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