Define direct and indirect materials and list the reasons why a large company would have two separate departments to manage the purchasing of each?

Direct materials are any raw materials, parts or sub parts
required for the completion of a product. The costs for direct materials can be
allocated to:

1. A cost
   centre


2. A Product


3. A work
   order 

Indirect materials are products that are
not used as direct inputs in the production process but are still used or required in
the production process. Characteristics of an indirect material
include: 

1. Costs are charged to overhead
   accounts


2. They are not easily allocated to specific work
   orders or finished product

A company would want
to have two separate departments to manage the purchasing of each because it would allow
for more efficient accounting. Direct material cost can be measured and quantified in
association with a particular product. This allows for proper allocation of resources
and calculation of Return on Investment (R.O.I). This is however not possible with
indirect material costs, so the accounting process is more streamlined if these costs
are calculated and accounted for separately.