Costs can be classified into those that are traceable to products and those that are non- traceable. The costs of raw materials that are directly and economically traceable as an integral part of a product, are called:

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Direct materials costs are those that are traceable to the products and are an integral part of the product. Raw materials that are directly and economically traceable to a product are considered direct materials costs. Cost of sales includes all costs related to selling a product, direct labour costs are the costs associated with paying workers to make the product, and factory overhead costs are indirect costs that cannot be directly traced to a product.

Costs Can Be Classified into Those That Are Traceable to Products