ABSTRACT
Direct materials represent those that are used to manufacture a product and that ultimately become part of that product. They also can be identified and traced to a specific finished product. Direct materials can be raw materials, any finished components, or other materials used for the overall completion of the product, such as paint. Direct labor represents the amount of labor and cost needed to convert the materials used into a finished product. Labor standards are established for each operation so that an overall labor cost can be developed. Expenses can be more easily controlled by breaking down the business into controllable segments. These segments can take the form of profit centers and cost centers. Cost centers represent segments of the business that incur costs but that do not generate revenue. Without the generation of revenues, individuals withresponsibility for profits cannot be held accountable.
