Daily Material Cost Formula
Learn how to calculate average daily material cost from stock, purchases, direct material costs and working days.
Average daily material cost estimates the value of materials consumed per operating day. It can help with internal costing, budget reviews and comparisons between periods when the underlying stock values use a consistent basis.
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Average Daily Material Cost
Where:
Add the materials available during the period, subtract the materials still on hand at the end, then divide the material cost used by the number of working days.
Variables Explained
| Variable | What It Means | Unit |
|---|---|---|
| openingMaterialStock - Opening material stock | Value of materials held at the beginning of the accounting period. | currency |
| materialPurchases - Material purchases | Cost of materials purchased during the accounting period. | currency |
| directMaterialCosts - Direct material costs | Directly attributable costs of obtaining or preparing materials for use, such as applicable carriage inward. | currency |
| closingMaterialStock - Closing material stock | Value of materials remaining at the end of the accounting period. | currency |
| workingDays - Working days | Number of production or operating days represented by the period figures. | days |
Step-by-Step Calculation
Calculate materials available for use
This totals opening materials, purchases and direct costs attributable to getting materials ready for use.
materialsAvailable = openingMaterialStock + materialPurchases + directMaterialCosts
Calculate material cost used
Closing stock is deducted because it represents materials that remain unused at the end of the period.
materialCostUsed = materialsAvailable - closingMaterialStock
Calculate the daily average
Divide total material cost used by the relevant working days to get an average cost per day.
dailyMaterialCost = materialCostUsed / workingDays
Example: daily material cost for a 26-day period
Materials available for use
$12,000 + $48,000 + $2,000
$62,000
Material cost used
$62,000 - $10,000
$52,000
Average daily material cost
$52,000 / 26
$2,000 per day
Final Result
The estimated average daily material cost is $2,000, based on total material cost used of $52,000.
Assumptions
- ✓All monetary values use the same currency and cover the same accounting period.
- ✓Opening and closing stock are measured and valued on a consistent basis.
- ✓Direct material costs include only costs directly attributable to obtaining or preparing materials for use.
- ✓Working days reflect the operating or production days covered by the stock and purchase figures.
- ✓The result is an average and does not imply that materials were used evenly every day.
Limitations
- !The calculation does not separately identify returns, rebates, waste, losses or write-offs.
- !Different inventory valuation methods can change opening stock, closing stock and reported material cost used.
- !A daily average may not reflect seasonal production, batch purchases or unusual operating days.
- !Indirect costs, labour costs and overheads are not included unless they have been incorporated into an entered amount.
- !This is an internal estimate and not accounting, tax or financial advice.
Common Mistakes to Avoid
Using calendar days instead of the production or operating days covered by the figures.
Including the same delivery or carriage cost in both purchases and direct material costs.
Entering closing stock from a different date or valuation basis than the rest of the period data.
Forgetting to deduct purchase returns or discounts where the accounting records have not already reflected them.
Treating the daily average as the actual material cost for every individual day.
Related Formulas
Frequently Asked Questions
What is the formula for daily material cost?
Daily material cost equals opening material stock plus purchases plus direct material costs, minus closing material stock, divided by working days.
How do you calculate material cost used?
Subtract closing material stock from materials available for use. Materials available are opening stock plus purchases and direct material costs.
Why is closing material stock deducted?
It is deducted because it represents materials still held at the end of the period rather than materials used during that period.
Are delivery costs included in daily material cost?
Direct costs such as carriage inward may be included if they are directly attributable to acquiring or preparing the materials and are not already included elsewhere.
What should I use for working days?
Use the production or operating days that the entered figures cover. Use the same day-counting approach when comparing periods.
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