Author Question: In a paragraph or two, distinguish between direct materials and indirect materials and explain why ... (Read 151 times)

iveyjurea · **on:** Jul 7, 2018

In a paragraph or two, distinguish between direct materials and indirect materials and explain why companies manage these costs in different ways.

Question 2

Briefly define the term spend as it is used in business purchasing. In a paragraph or two, explain how the Internet has reduced the spend of many U.S. manufacturing companies.

jliusyl · **Reply #1 on:** Jul 7, 2018

Answer to Question 1

Direct materials are those materials 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.

Indirect materials are all other materials that the company purchases, including factory supplies such as sandpaper, hand tools, and replacement parts for manufacturing machinery.

Answer to Question 2

The total dollar amount of the goods and services that a company buys during a year is called its spend. By using Internet technologies in their purchasing, logistics, and support business processes, such companies can save billions of dollars each year.