Final answer:
Direct materials are categorized as a Product Cost since they are raw materials that vary with production and are directly used in manufacturing the product.
Step-by-step explanation:
In the context of cost accounting, direct materials are considered a Product Cost. This is because they are directly attributable to the production of goods. When discussing costs, we can categorize them into fixed and variable costs. Fixed costs, such as rent on a factory, do not change with the level of production.
They are incurred regardless of how much is produced. On the other hand, variable costs change in proportion to output and include costs such as labor and raw materials used in production. Since direct materials are raw materials that vary with production, they fit within the realm of variable costs and are directly part of manufacturing the product.