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Materials and Inventory Cost Control:

Materials control is the system that ensures the provision of the required quantity and quality at the required time with in the minimum of investment. It covers the following functions:

  • Stock control
  • Scheduling of requirements
  • Purchasing
  • Receiving and inspecting
  • Storing and issuing
  1. Need for Materials Cost Control:

    One of the first step in the installation of cost Accounting system is planning the proper control of materials and supplies from the time orders are placed with supplier until they have been consumed in the plant and office operation or have been sold as merchandise. Click here to continue reading.

  2. Requirements for a System of Materials Control:

    The important requirements or essentials of adequate satisfactory system of materials are: proper coordination, competent purchasing agent, use of standard forms etc.. Click here to continue reading.

  3. Stock Control:

    The materials purchased by a concern may be classified as stock items which are taken into store and held until required, or as direct deliveries to the point of consumption. The control of those materials which are stock items is known as stock control. Click here to continue reading.

  4. Reorder Level:

    This is that level of materials at which a new order for supply of materials is to be placed. In other words, at this level a purchase requisition is made out. This level is fixed somewhere between maximum and minimum levels. Order points are based on usage during time necessary to requisition order, and receive materials, plus an allowance for protection against stock out.
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  5. Minimum Level or Minimum Limit:

    The minimum level or minimum stock is that level of stock below which stock should not be allowed to fall. In case of any item falling below this level, there is danger of stopping of production and, therefore, the management should give top priority to the acquisition of new supplies. Click here to continue reading.

  6. Maximum Level or Maximum Limit:

    The maximum stock limit is upper level of the inventory and the quantity that must not be exceeded without specific authority from management. In other words, the maximum stock level is that quantity of material above which the stock of any item should not normally be allowed to go. Click here to continue reading.

  7. Danger Level of Materials or Inventory:

    Some enterprise also calculate danger level. When this level of stock is reached, then emergency steps are taken by the management to acquire material supplies. Click here to continue reading.

  8. Economic Order Quantity (EOQ):

    Economic order quantity (EOQ) is that size of the order which gives maximum economy in purchasing any material and ultimately contributes towards maintaining the materials at the optimum level and at the minimum cost.




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