Issuing and Costing Materials into Production:

To control the quantity and cost of materials, supplies, and services requires a systematic and efficient system of purchasing, recording, and storing. Equally necessary is a systematic and efficient procedure for issuing materials and supplies.

Materials Requisitions:

The materials requisition, illustrated below, is a written order to the storekeeper to deliver materials or supplies to the place designated or to give the materials to the person presenting a properly executed requisition. It is drawn by someone who has the authority to requisition materials for use in the department. The authorized employee may be a production control clerk, or department head, a supervisor, a group leader, an expeditor, or a materials release analyst. In a computerized system, the computer program will often prepare the requisition in the form of a tabulating card.

The materials requisition is the basic form used to withdraw materials from the storeroom. Its preparation results in entries in the issued section of the materials ledger card and in postings to the job order cost sheets, production reports or the various expense analysis sheets for individual departments. All withdrawals result in debits to work in process or to control accounts for factory overhead, marketing expenses, or administrative expenses, and in credits to materials.

Materials Requisitioned Journal:

With the posting to the materials ledger cards, the job order cost sheets, the production reports, and the expense analysis sheets completed, it is still necessary to post the materials withdrawals to the proper ledger control accounts. This task is greatly facilitated by the use of a materials requisitioned journal. This journal is a form of materials summary.

At the end of the month, the total of the various columns are posted directly to the ledger accounts, except for the sundries column from which items are posted individually.

Tabulating cards as materials requisitions:

Tabulating cards are convenient input or output devices for computer operations to produce the card, the computer is instructed by the console operator to perform certain materials issuance transactions for jobs or products. The card serves as authority for the storekeeper to issue the materials, internal computer operations will update the material data bank and eventually produce output reports including totals that will be entered in the general ledger accounts, unless those accounts are also part of the EDP system.

Indirect materials or supplies for factory or office use will also be stored in the inventory data bank of the computer. When such materials are needed, a request will inform the computer as to type, quantity, and requesting department. Supplies requisitioned for marketing and administrative departments would be charged to their respective departments.

Bill of Materials:

The bill of materials, a kind of master requisition, is a printed or duplicated form that lists all the materials and parts necessary for a typical job or production run. Time is saved and efficiency is promoted through the use of a bill of materials. When a job or production run is started, all the materials listed on the bill of materials are sent to the factory or are issued on a prearranged time schedule. As the bill of materials is a rather cumbersome medium for posting purpose, however, data processing improves the procedure by simultaneously. Preparing tabulating cards for materials requisitions. While the storekeeper issues the materials as stated on the bill of materials, the tabulating cards can be processed in the materials ledger section and in the cost department at almost the same time as the materials are used in the factory. A computer program will provide the print outs of the bill of materials and process the information internally to update the accounting records.

You may also be interested in other relevant articles:

• Purchases of productive material.
• Purchases of supplies, services, and repairs.
• Materials purchasing forms.
• Receiving materials.
• Invoice approval and data processing.
• Correcting invoices.
• Electronic data processing for materials received and issued.
• Cost of acquiring materials.
• Storage and use of materials.
• Materials ledger card--perpetual inventory system.

Materials Costing Methods:

• First-in-First-Out (FIFO) Costing Method
• Average Costing Method
• Last-in-First-Out (LIFO) Costing Method
• Other Materials Costing Methods--Month end average cost, last purchase price or market price at date of issue, and standard cost.

Cost of Materials in Inventory at the end of a Period:

• Inventory valuation at cost or market whichever is lower
• American Institute of Certified Public Accountant (AICPA) cost or market rules
• Adjustments for departures from the costing method used
• Inventory pricing and interim financial reporting
• Transfer of materials cost to finished production
• Physical inventory
• Adjusting Materials Ledger Cards and Accounts to Conform to Inventory Accounts

Costing Procedures for Scrape, waste, Spoiled Goods and Defective Work:

• Cost accounting procedure for scrap and waste
• Cost accounting procedure for spoiled goods
• Cost accounting procedure for defective work

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