Indirect material costs are those that are not directly added into the product. There are many times where materials are required to manufacture a part but are not put directly into the product.
Examples of this may include 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 are 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 charging the customer a separate one-time fee.
Other possible indirect material costs might be nuts, bolts, screws, or other smaller, inexpensive items. Typically, this would be added into the product causing those materials to be direct costs but, in some situations, these type of items could be considered indirect costs.
