Need for Materials Control:
One of the first step in the installation of
cost and management 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 based.
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