Need for Materials 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.
Materials represent
an important asset and is the largest single item of
cost in almost every business; accordingly the
success or failure of a concern may depend largely
upon efficient material purchasing, storage,
accounting, utilization and control.
Where materials are
not properly controlled, excess stock of some items
are likely to occur with a result unnecessary tying
up of capital and loss through deterioration and
obsolescence. Shortages of other materials may arise
at the time when they are urgently needed and
production will then be delayed.
The purchasing of
materials is a highly specialized function. By
ordering the right quantity and quality of materials
at the most favorable price, and by ensuring that it
arrives at the right time, the efficient buyer is
able to make a valuable contribution to the
success of a business. The efficient material
control costs out losses and forms of waste that
otherwise ten to pass unnoticed. Theft,
misappropriation, deterioration, breakage and
additional storage costs can be reduced to a minimum
by proper controls, and much avoid idle time in the
factory will be cut out if materials are available
to meet the demands of the production staff. Finally
and most important to the cost accountant, it is
impossible to produce reliable costing information
if the records of materials issue are
unsatisfactory, because a cost statement cannot be
more accurate than the information on which it is
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