Direct materials are those which are used in the production of finished good that are traceable directly to product. It's considered prime cost and a direct expenditure. An example is Flour, sugar, and vegetable oil are direct materials of a company that manufactures dessert products. Indirect materials are those which cannot be directly traceable to production of a product. It is considered as overhead and is an indirect expenditure. An example being glue, oil, tape, cleaning supplies, etc. are classified as indirect materials. Direct labor are that which are used in the production of finished goods that are traceable directly to product. It is considered a prime cost and a direct expenditure. This includes all individuals responsible for producing a company's consumer goods or services. Examples include assembly line workers, production supervisors, delivery truck drivers and quality control inspectors. Indirect labor are those which cannot be directly traceable to production of a product. It is considered overhead and is an indirect expenditure. It is the labor of those who are not directly involved in the production of the products. An example would be security guards, supervisors, and quality assurance workers in the factory. Their wages and benefits would be classified as indirect labor costs. As a manager for a company what really would be the key factor in my decision of classifying materials or labor direct or indirect will be solely based on how much of an impact they have on the final product or the production stages themselves. If a material is considered essential to the creation or production of a product then it will clearly be considered a direct material. Same goes to labor, although in most cases I do believe that every employee is essential to a company and its production. I as a manager to manage costs and spending I would only consider direct labor those who work first hand with the product, from design to production to distribution.