8 Essentials of Material Control in Cost Accounting

In this Article, we will talk about the Material Control- Meaning, Need and 8 Essentials of Material Control.

Every Manufacturing Firm require some type of raw material by which they manufacture the final product. But How to produce the goods at which cost which will increase the efficiency of production? How to control your Raw Material in such a way so that you will get the maximum output at the minimum Investment? The Answer to this is Material Control.

Also Check- Complete Cost Accounting Notes for BBA, BCOM, MBA PDF Download

Material Control is a systematic control of producing the goods at the optimum cost to maximize the efficiency of production. Material Control is a system which helps in allocating the right material quality at right place and time with less capital investment.

But to get good results in production, there are some needs and essentials of the material control which every organization has to follow.

Need/ Objectives of Material Control

  • To Maintain regular material of supply- The First Objective of Material Control is to maintain the  raw material supply regularly so that there should not be any interruption in the production. Production should be done in a non-stop manner.

  • To avoid overstocking- Maintaining the regular supply is important but overstocking of raw materials can lead to wastage for the organization. Overstocking of goods can reduce your budget to spend on other important things.

  • Getting Material at reasonable prices- To increase the efficiency in production, firms have to analyze all the suppliers in the market, their material qualities so to choose the best material at reasonable prices.

  • Minimize the wastage- There should be less wastage of material during the storage and the production process. Standards should be fixed for the wastages to keep it minimum.

  • To have up to date information- There should be proper reporting system in the organization. Management has to be informed about the production status, raw material stock and more from the storekeeper, other authority members.

  • Adoption of Internal Check System- Internal Check System should be adopted in the organization. An Existing Employee is appointed for the inspection of work to check whether the production is done according to the planning or not.

  • To enable uninterrupted production- To get good results in the production, there should be uninterrupted production. If there is any shortage of material, any cliche in the machinery, it should be resolved periodically.

Essentials of Material Control

  • Proper Coordination- Effective Material Control requires the proper coordination between the departments involved in the production, purchasing, finance etc. There should not be any excessive investment in materials and over stocking should be avoided.

  • Proper Purchasing– The Second Essential of Material Control in Cost Accounting is that the purchasing should be done at the right time, place and term.

  • Centralized Purchasing- Purchasing should be done in the centralized form. In Centralized form, there is one Purchasing Department to whom all the departments give the materials list to be purchased and purchasing department purchase this from the market.

  • Proper Storing- To avoid shortage of materials, there should be proper storing in the firm. Levels of Stock should be made- Minimum Level, Maximum Level and Reorder Level to avoid overstocking, understocking.

  • Proper Inspection- Proper Inspection should be done to get the effective results in production. Whatever you have planned for your production, are you getting that results or not. If there is any mismatch with your standards, find out the deviations and improve the production.

  • Proper Accounting- Proper Accounting system should be maintained to know the allocation of materials and avoid wastage of materials.

  • Proper Stock Taking- Perpetual Inventory System should be followed in the organization to find out the difference in the stock due to any wastage or theft.

  • Proper Reporting System– Proper Reporting System helps the management to take better decisions about the further material Investment and to avoid the low quality materials.

So, this was about the Material Control Meaning, Need and Essentials of Material Control.

Also Read-

Cost Accounting Notes for BBA, B.COM and MBA Students

Components of Total Cost in Cost Accounting

Methods and Techniques of Costing

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