Indirect Material Costs

Indirect material costs are those costs that are not directly added into the product.   There are many times materials required to manufacturer a part but those materials are not put into the product.  Examples of this situation are oils, lubricants for machines, sandpaper, molds and castings.   There are some situations where the molds and castings would be included into the direct material costs because they specific for the product.  When doing estimates in this way you have the choice of amortizing the mold and casting costs into the product or charge the customer separate as a one time charge.

Other possible indirect material costs are nuts, bolts, screws or inexpensive items.  Usually this would be added into the product causing those materials to be direct costs but there are situations depending on the product being manufactured where these type of items would be indirect costs.

 

Author: MIE Solutions

David Ferguson has over 20 years of experience in the manufacturing and fabrication industry. David Ferguson has been to over 100 manufacturing companies helping and guiding them to be more efficient and cost effective. As a child in Junior High School David Ferguson found a passion for the early computer systems, which would drive much of his future work. David Ferguson created and sold his first computer program, Arrow Data Systems, which was an early CAD/CAM system for the Apple 2e Computer. In the late 1980's after seeing his father (a sheet metal manufacturer) come home many nights estimating, David Ferguson saw an opportunity to optimize his effort through computer technology. Shortly thereafter the FabriTRAK Production Control package was developed. The Quote It! estimating package was developed out of the FabriTRAK system to become one of the leading sheet metal estimating packages in the world. David Ferguson has always had a passion for developing software to make the manufacturing process simpler, faster and more efficient. Prior to founding MIE Solutions David Ferguson worked with his father at Alco Sheet Metal, METALSOFT Inc. and was a consultant at Toyota Motors Sales. David Ferguson has his Masters in Computer Science and Mathematics from California State University, Long Beach.

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