unit 2(a) - COST ACCOUNTING(PART 4 MATERIAL CONTROL AND...

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COST ACCOUNTING (PART - 4) MATERIAL CONTROL AND ACCOUNTING 1. INTRODUCTION Dear students, welcome to the lecture series on cost accounting. Today we shall read material control and accounting. In this lecture, we will cover meaning of material control, its objectives and the process by which material control can be exercised. The objective of this lecture is to understand the meaning of material control, the mechanism by material can be control from the inception of the demand till it is finally consumed and accounted for. We need to understand coordination between various departments so that a continuous flow of material can be possible for the production process. The rational of material control is to provide material in right quantity of right quality and in right time at the minimum cost of capital. 2. MATERIAL CONTROL MEANING AND ITS OBJECTIVES We will learn some basic concepts before learning material control. Since material control is formed by two words, material and control, so we will learn the meaning of material. Material forms major proportion of total cost of a product. Hence we need to insure proper control over material.
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A material cost can be direct material cost or indirect material cost. Direct material cost means those cost which are directly attributable to a product, process or a job, like a. Timber used in manufacturing a chair,
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b. Milk can cream used in preparing ice cream, c. Iron used in making a iron almirah. So they are directly attributed material and they are the major components used for preparing something. What is indirect material? They are not directly attributable or traceable in a product but they are used as a helping element or ancillary element, like pins, clips, oil, grease,
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Both direct and indirect material forms the cost of material. We have to add cost of purchase that is the purchase price of material, we need to add all taxes, we will add sales tax, then we have to add carriage inward, freight, duties, now what we need to subtract from this material cost, the rebate, trade discounts or any refundable duty and lastly, returnable packing material like drums or anything which has to be return back. This way we will compute our material cost. What is material control? When control word comes, what picture comes in our mind is a process. And it shall starts from planning, organizing, and controlling.
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So material control means it is the process which involves planning, controlling and scheduling the material requirement that is from procurement, storing and usage of material with an object of earning economy and efficiency, that means economy means minimum cost need to be spend for controlling or procuring the material and efficiency means least amount of wastage.
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This is the objective of material control.
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