Material control
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This document discusses material control and inventory valuation methods. It defines materials and supplies that are used in the manufacturing process. Material control aims to ensure adequate quality and quantity of materials for production with minimal costs. The objectives of material control are to prevent overstocking and understocking while protecting materials from loss and waste. Valuation methods like FIFO and LIFO are also covered, where FIFO assumes the first materials purchased are the first sold and LIFO is the opposite.
Material control
- 1. Material Control Meaning and Needs of material control & Inventory valuation Method Presented To: Prof. Amitabh Maheswari Presented By: Ram Dubey Deva Sharma Kuldeep Morey
- 2. Commodities that are supplied to an undertaking to be utilized in the manufacturing process or to be transformed into products are called “Materials”. Materials constitutes major portion of the total cost of the product. Supplies are also used for the manufacture of product. Both materials and supplies are collectively called as stores. The finished goods are termed as stock. What is Material ?
- 3. Materials control refers to managerial activities relating to giving instructions or directions to ensure maintaining adequate quality and quantity of materials for uninterrupted production process with the objective of minimizing material cost per unit. What is Material Control?
- 4. The main objectives of materials control are presented below: 1. Ensures adequate supply of materials as and when required for smooth production process. 2. Prevents over stocking and under stocking of materials. 3. Quick identification and supply of materials to the production department. 4. Prompt issue of materials. 5. Safeguarding of materials from loss of stock by theft and fire. 6. Protection of materials from unnecessary wastage of materials. 7. Protection of stores against pilferage. 8. Minimization of storage cost. Objectives
- 5. 1. Materials control eliminates wastage in use of raw materials and supplies in course of purchase, storage, handling and use. 2. It ensures uninterrupted flow of right quality and quantity of materials to the production department. 3. It reduces the risk of fraud and theft. 4. It facilitates the preparation of various monthly financial statements. 5. The valuation of materials is very easy. 6. It requires minimum amount of capital to buy materials. 7. It fixes the responsibility on the part of the employers who are handling the materials at the maximum. Advantages
- 6. There are methods for value the inventory:- 1. First-In-First-Out(FIFO) 2. Last-In-First-Out(LIFO)
- 7. This method assumes that the first inventories bought are the first ones to be sold, and that inventories bought later are sold later. Advantages: When a company uses FIFO they are less likely to incur old and outdated inventory that can no longer be sold. It is the most widely accepted way for inventory management. When companies use FIFO they will constantly have an updated reflection of the current market prices for the items in their inventory. First-In-First-Out(FIFO)
- 8. I think one of the biggest disadvantages to FIFO is the inconsistent prices given to clients. The second disadvantage would be clerical errors. Disadvantage
- 9. Last in first out is the opposite of FIFO in that the last items acquired by the business are the first ones sold. The companies that decide to use LIFO over FIFO most often do it for the tax advantages. Advantage: LIFO most often means lower profits for the company, but when you report lower profits, you don’t have to pay as many income taxes. This allows the business to have more cash-in-hand to use for investment opportunities or to purchase more inventory. Last-In-First-Out(LIFO)
- 10. Because of inflation, where costs and expenses continue to rise, LIFO will have a lower profit margin than that of FIFO. Disadvantage