A manufacturing company incurs different types of costs to produce a unit of output.Such costs includes material costs, labor costs and other costs.Among them, material costs are important because in many manufacturing companies such costs are greater than all other costs combined.
Material is one of the most important elements of production. The term 'Material' refers to raw material used for production, sub-assemblies and fabricated parts. Materials include components, consumable stores, maintenance, spare parts and tools. They are used in manufacturing industries in their fundamental forms and they constitute a part of the physical form of product. Wool, cotton, glass, sugarcane, rubber are the some examples of materials. The cost of all such materials constitute part of the cost of jobs, operations, products or service for which they are utilized. Materials represents nearly 65-70 percent of the costs of production in most manufacturing firms.