Indirect Materials

Indirect Materials Definition

In accounting, indirect material is a category of indirect cost. Indirect materials are materials used in a production process, but they are not directly traceable to a cost object. Consider these costs as overhead costs and treat them accordingly.

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Indirect Materials Example

It is not always easy to distinguish between direct and indirect materials. Some materials may be used in the production process or in the services provided; however, you would still consider them indirect because they are not monetarily significant or not conveniently traceable.

For example, spices added to a hot sauce during the production of the sauce. The spices are necessary for the recipe, but they are not easily traceable. Instead, consider those spices indirect materials and treat them as such.

Another simple example of this could be office supplies at a service company. In order to provide the service, you may need to have office supplies, such as pens, paper, and staplers. But these costs are not substantial enough and not directly traceable to the service provided. So they are treated as indirect material costs and part of overhead.

Indirect Materials

Treat indirect materials, like other indirect costs, as overhead. Either expense them in the period in which they are incurred, or allocate them to a cost object via a predetermined overhead rate. Want to check if your unit economics are sound?  Download your free guide here.

Indirect Materials

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Indirect Materials

See Also:
Indirect Labor
Audit Committee
Managed Sales And Use Tax Audit Programs
Mining the Balance Sheet for Working Capital
Inventory to Working Capital

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5 Responses to Indirect Materials

  1. Vishwa January 28, 2016 at 3:39 pm #

    Thanks! It was of great help.

    • Ajith Sahani March 2, 2016 at 4:11 am #

      Bro can u send me the balance sheet of material management of indirect material

  2. Ajith Sahani March 2, 2016 at 4:10 am #

    Can u show me the balance sheet of material management of indirect material

  3. Khotso Manare September 22, 2017 at 11:45 pm #

    Really good out of the box examples

  4. sinta February 8, 2018 at 12:14 am #

    hello.. could you tell me if the mineral water manufacturer has indirect material on their product or not ? thanks before:)

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