material costs

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As material costs (or material costs ; English cost of materials ) is called in accounting alone by operational purpose-related consumption of materials and energy in the production process resulting costs .


Material costs or material costs are a collective term under which various types of costs are summarized. They arise in commercial enterprises of all kinds, not only in the actual production plants, but also in credit institutions . What distinguishes these types of business from one another is the type and amount of material costs in relation to total costs or sales . Material costs Intensive those companies where the share of material costs in total costs or revenues over 50% are reached. In industry, the material-cost-intensive companies include, for example, the consumer-related companies in the food industry or the automotive industry . Here, careful materials management is of great importance, because a 4% reduction in material costs (with sales revenues of 100 million euros, an operating result of 6 million euros and material cost intensity of 50%) would increase the operating result to 8 million euros to lead. In order to achieve this by increasing sales, sales would have to be increased to EUR 133 million (33%). This profit contribution from materials management can be interpreted as a compensation for unrealizable increases in sales. The leverage effect described here results from the following key business figure :

The following apply:

  • GB = profit contribution from materials management, shown as a corresponding increase in sales
  • MK = material cost share in% of sales
  • E = reduction in material costs in% of material costs
  • R = return on sales

In material-intensive companies, the material cost ratio (material intensity) plays a special role:

The cost of materials ratio is the ratio between the cost of materials shown in the income statement and the total output (or sales) of a company. Using this key figure, a company can compare itself with other companies in its branch in order to recognize whether competitors achieve their performance with lower material costs and can therefore indicate possible inefficiencies in the operational process.


In cost type accounting , material costs are divided into:

In cost unit accounting, the material costs are made up of the direct material costs and the material overheads. The material overheads correspond to an adequate allocation of the material procurement and storage costs:

+ Direct material costs
+ Material overheads
= Material costs

The direct material costs represent a causal allocation option to the end products; all other material costs are distributed to the products as material overheads using a distribution key.


Four methods are available for recording the quantitative consumption:

  • Receipt method: it assumes that the material quantities procured in a billing period were also used in this period.
  • Inventory method : on the basis of an inventory , the starting stock and the ending stock are determined so that the difference results in the material consumption.
  • Discount method : Incoming goods in the warehouse according to the delivery note and outward movements in accordance with the material withdrawal note are recorded so that the material consumption corresponds to the inventory reductions.
  • Retrograde method: is an imprecise calculation, as the target consumption quantities are determined for each product created, so that actual consumption quantities are not taken into account.

Where material costs are used to evaluate stocks, the corresponding accounting regulations must be taken into account. In production controlling, material costs flow into the cost unit or cost and performance accounting according to the material used as part of the manufacturing costs .

Material evaluation

In the simple case, the direct material costs are valued at the cost price . If, however, a warehouse stock consists of several deliveries, each of which was procured at different cost prices , the material should be valuated at the moving average price . Example: An oil tank that is filled before it is completely emptied.

In addition to the average method, various other approaches are also conceivable:

  • Lifo method: Last In - First Out method, in which the value is calculated based on the purchase price of the last quantity purchased
  • Fifo method: First In - First Out method, in which the value is calculated based on the acquisition value of the first purchased quantity
  • Hifo method: Highest In - First Out method: Consumption is valued at the highest realized purchase price
  • Lofo method: Lowest In - First Out method: Consumption is valued at the lowest realized purchase price
  • Standard costs : a fixed material price, e.g. B. the average costs at the time of the annual preliminary calculation

Standard material costs are used in particular when semi-finished products are produced in- house and temporarily stored. Standard costs then correspond to the target cost value determined once a year . The production costs are then measured against this target cost value and deviations can be differentiated and analyzed in price deviations and quantity or consumption deviations .

Annual accounts

In the profit and loss account , the material costs belong to the manufacturing costs according to § 255 Paragraph 2 Clause 2 HGB and are to be shown as "Material expenses" according to § 275 Paragraph 2 No. 5 a) HGB.

Individual evidence

  1. Konrad Mellerowicz, General Business Administration , Volume 2, 1954, p. 30
  2. Wolfgang Lück (Ed.), Lexikon der Betriebswirtschaft , 1990, p. 788
  3. Hans Arnolds / Franz Heege / Carsten Röh / WernerTussing, Materials Management and Purchasing , 2013, p. 13
  4. ^ Karl-Christian Freidank, cost accounting , 2012, p. 96
  5. Jana Eberlein, operational accounting and controlling , 2010, p. 80