Final answer:
The statement is true. Indirect materials are materials used in the production process that are not easily traceable to the final product in terms of cost.
Step-by-step explanation:
The statement, 'When the physical association of raw materials with the finished product is too small to trace in terms of cost, they are usually classified as indirect materials,' is true.
Indirect materials are materials that are used in the production process but are not easily traceable to the final product in terms of cost. They are often small in quantity and value compared to direct materials, which are easily identifiable with the finished product.
For example, in manufacturing a car, direct materials would include the metal used for the car body, the engine components, and the tires. On the other hand, the lubricants and cleaning supplies used in the assembly line would be considered indirect materials.