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IV. ACCOUNTING-FOR-MATERIALS
IV. ACCOUNTING-FOR-MATERIALS
MATERIALS
Reorder Point, Periodic and Perpetual Costing System, etc.
OBJECTIVES OF MATERIALS
CONTROL
Efficient purchasing, management, and investment
in materials by forecasting sales based on
quantitative techniques
To keep storage costs of materials and avoidance
of spoilage costs
To have an optimal level of materials inventory for
uninterrupted production schedule
To focus on inventory control especially for
expensive raw materials that are prone to theft.
MATERIALS INVENTORY
CONTROL
LIMITED ACCESS – only authorized
personnel should have access to storage
area. Documentation of issuance of raw
materials is a must.
SEGREGATION OF DUTIES –
segregation of duties for purchasing,
receiving, storage, use and recording.
ACCURACY IN RECORDING
Inventory Control Methods
1. Min-Max Method
2. Two Bin System
3. Order Cycling System
4. Automatic Order System
5. ABC System
WHEN TO ORDER? WHAT IS
OUR ORDER POINT?
1. FIFO METHOD
2. AVERAGE COST
Sample Problem
DATE TRANSACTIONS AMOUNT
JAN. 1 BEGINNING INVENTORY 400 units @ P10 4,000
8 PURCHASE 600 UNITS @ P12 PER UNIT 7,200
14 ISSUE 500 UNITS
18 PURCHASE 300 UNITS @ P15 PER UNIT 4,500
22 ISSUE 200 UNITS
27 PURCHASE 400 UNITS @ P14 PER UNIT 5,600
31 ISSUE 400 UNITS
When the job was completed, 200 are spoiled units, a normal number, with resale
value of 20.00
On the other hand, if the defective materials are charged to all production,
meaning the company experienced it normally, it is charged as a NORMAL
LOSS forming part to FOH CONTROL ACCOUNT WITH A CREDIT TO
TOTAL COSTS INCURRED
God bless!
Source:
De Leon, Norma; De Leon, Ellery; De Leon, Guillermo, Jr., /Cost Accounting and Control 2019 Edition