Raw Material | Definition, Types, Formula and Examples

Hello everyone! I am here to discuss an amazing topic in this post. Have you ever experiences to work with Raw Materials? Working with Raw Materials has benefits for the owner and also reduces his expenses as compared to artificial products. I will provide you with how we can deal with Raw Materials. The Raw Material selection has specific criteria in the environment. You know the selection of the Raw Material is the important factor for the product quality and its safety.

Raw Material Definition

Raw Materials are the substances which are unfinished substances that have the ability to manufacture or create finished products for continual use. The Raw Material goes into the process and by converting those into intermediate products the final products can be formed. Examples of the Raw Materials are Crude Oil, Cotton, Rubber blank, Mineral Ores, and Raw Biomass.

These Raw Materials are used for the production of the Final Products and these are the most in-demand substances. Moreover, these are the beneficial for use of humanity. The initial or primary commodities are based on the plants, Animals, and minerals to form the structure of the biotic and abiotic substances. Direct and indirect accounting makes this unfinished material so straightforward.



The Raw Material for the story used is taken as his experienced example during the war.

Types of Raw Material

The Raw Materials can be obtained naturally, but they can also be classified into three categories:

Plant/ Tree Based- These Raw materials are like fruits and vegetables, flowers, resign and latex

Animal Based- These materials like meat, bones, leather, milk, and also wool.

Mining Based- These are materials like metals, minerals, crude oil, and coal obtained by the mining of the earth.

Understanding Raw Materials

The most crucial aspect of production at any industrial level is the Raw Material to start the work. Of the production problems, we have to keep their supply track more accurate. There is almost everything comes from the earth and it is manufactured and processed from unfinished materials.

There are some products that are available in several forms that play a prominent role in mass production. The secondary commodity becomes recyclable products. The uncompressed materials rely on the basis of mineral reserves.  The self-sufficient capacity of the country is based on the production of the natural resources of the area. To produce the domestics and the jobs for their employees export is the most ideal way.

Significance/ Importance of Raw Materials

As I have already discussed that the production of the finished product requires Raw materials, and also these are processed and converted into end products.

There is also the role of inventory management, which is important because it maintains the raw materials to produce properly and preserves them from mishaps. The finished products are also sold made from these Raw Materials

Calculation Formula for Raw Materials

Here are some of the essential formulas to calculate the Raw Materials:

For the sake of that how much Raw Material is used in the manufacturing process, we have to use some formulas for it:

Opening RM + Raw Material Purchased – Closing RM = Raw Material used

Opening Raw material worth = $ 12000

Purchased Raw Material worth = $5000

Closing Raw Material = -$9000

By using the above formula,

12000+ 5000- 9000 = 8000

We have now resulted by use of the formula that the Raw Material worth which is used for this process is $8000

Types of Raw Materials

Raw Material

The Raw Materials are classified into two main types based on their processing methods:

Direct Materials – Direct Raw Materials are the basic things that are primary inputs such as wood, cotton, etc. are directly used by different companies to manufacture some end useful product. For direct raw materials, the material which is unprocessed is used in the manufacturing process. In contrast when there is no inventory the exact account is credited.

Indirect materials – These are the materials that are different from other raw materials because these do not form part of the end product. They only contribute to its production; Examples of these materials are glue, oil, and tape. Moreover, these materials are considered naturally produces in the manufacturing process.

Final Words

So guys! I have tried to discuss everything related to Raw Materials in this post. I hope you have read this post carefully. The role of Raw materials in our life is very important. If you have any questions related to the Raw Materials, you are free to ask.

Frequently Asked Questions

Q: What are Raw Materials?

Ans: Raw Materials are natural substances that are used for the manufacturing of useful products for sale. These materials are very useful for the manufacturing process. These are crude oil, wood, coal, and rubber.

Q: What are two types of Raw Materials?

Ans:  The Direct materials  which are used in different companies to form useful products, are usually wood, cotton, and oil

Indirect materials are those which can contribute to the production of useful products but not directly part of the finished product.

Q: Describe the basic rule for the accounting of Raw Materials.

Ans: The current asset is named as unfinished materials put into the inventory label. The entry is from the debit side of the inventory but it records the unprocessed material. These materials are available in accounting and at a low cost.

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