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"Direct Materials" and "Indirect Materials"

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Define "direct materials" and "indirect materials." List the reasons that a large company would have to separate departments to manage the purchasing of each.

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The expert defines direct materials and indirect materials. The reasons that a large company would have separate departments to manage the purchasing of each is determined.

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Businesses make a distinction between direct and indirect materials. Direct materials are those that become part of the finished product in a manufacturing process. Steel manufacturers, for example, consider the iron ore that they buy to be a direct material. The procurement process for direct materials is an important part of any manufacturing business because the cost of direct materials is usually a very large part of the cost of the finished product. Large manufacturing companies, such as auto manufacturers, engage in two types of direct materials purchasing. In the first type, called replenishment ...

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