Provides a detailed explanation of different aspects of material control. Very useful to undergraduate students of different universities and cost accounting professional students

1. material CONTROL
DR. MOHAMED KUTTY KAKKAKUNNAN
Associate Professor
P.G. Dept of Commerce
NAM COLLEGE KALLIKKANDY
Kannur –Kerala – India

2. MATERIAL
• The basic requirement for production process
• Often the most important element of cost
• “material means any commodity or substance which is
processed in a factory in order to be converted into finished
product”
Classification of Materials
 Raw material – the basic material supplied in crude form to
be used for production
 Components – finished parts made out of raw material
which are assembled to make finished products
 Tools – appliances used in manufacturing operations
 Spare parts- used for maintenance of plant, machinery etc
 Consumable stores- items used for smooth running of
machines like lubricants, oil, cotton wastes, rags, etc

3. Materials are the physical commodities used in the
manufacture of the finished product
The starting point from which the first operations
start
Direct and Indirect Material
Direct materials are those materials which form
part of the finished product. Direct material can
be conveniently and accurately allocated to a
particular cost unit
Indirect materials are those materials which cannot
be conveniently and accurately allocated to
particular unit of the product. These materials
are not treated as a part of the product

4. MATERIAL CONTROL
• Materials account for a major part of cots (60%)
• Maximum profit - Proper control of material cost
is essential cost control and const reduction
• “a system which ensures that right quality of
material is available in the right quantity at right
time and place with right amount of investment”
• “a comprehensive framework for the accounting
and control of material cost designed with the
object of maintaining material supplies at a level
so as to ensure uninterrupted production but at
the same time minimizing investment of funds”

5. MATERIAL CONTROL
“is a systematic control over the purchasing,
storing and using of material so as to have
the minimum possible cost of materials”
Control is to exercised at each stages of
material handling (dealing)
Three important stages of material control
Purchases control
Stores control
Issue control

6. Aspects of Material Control
Two aspects-
1. Accounting aspect – related with maintaining
documentary evidence of movement of
materials at every stage right from the time of
sales and production budgets are approved to
the point when the materials are purchased and
actually used in production operations
2. Operational aspects – is concerned with the
maintenance of material supplies at a level so as
to ensure that materials is available for use in
production as and when required by maintaining
minimum investment in material

7. Need (Objectives of Material Control)
1. To ensure continuous availability of right
quality of material, in the right quantity at
the right time
2. To ensure that there is no excessive
investment in materials
3. To ensure materials are purchased at right
or reasonable prices
4. To ensure minimum wastage of materials at
different stages of handling materials

8. Need (Objectives of Material Control)
Contd..
5. To ensure that there is no risk of spoilage and
obsolescence
6. To ensures ready information about different
aspects of materials, by maintaining proper
records on the movement of materials
7. To prevent fraud and misappropriation of
materials
8. To ensure right amount is paid to the suppliers

9. Essentials of Materials Control
1. Proper co-ordination and co-operation
among different departments involved in
purchasing, storing, issue and use of
materials
2. Centralized purchasing
3. Proper scheduling, classification and
codification of materials
4. Proper inspection at the time of receipt
5. Should use standard forms

10. Essentials of Materials Control(contd..)
6. Proper storage facilities to prevent losses
7. Perpetual inventory system shall be used
8. Proper internal check system for materials
9. Set different level for materials (minimum,
maximum, re-order)
10.Set economic ordering quantity to minimize
ordering and carrying costs of materials
11.Maintain adequate record to ensure minimum
wastage of materials and to provided ready
information

11. Purchases Control
• Material – major part of financial commitment
• Control has to start from purchases onwards
• Separate department for purchases
– Purchases Department
• Purchases Manager, Supply Manager, Chief
Buyer etc.

12. Need for a Separate Purchases Department
“To ensure continuous availability of required quality of
material, to avoid held up of production and loss in
production and at the same time reduce the ultimate
cost of the finished product”
1. To make continuous flow of materials (uninterrupted
production)
2. Purchase competitively and wisely
3. Purchase in reasonable quantities and minimize
investment in materials minimum
4. Purchase proper quality of materials (reduce wastage)
5. Develop good supplier relationship so as to get
supplies at reasonable prices

13. Organization of Purchasing
Department
Centralized vs. decentralized
• Centralized purchasing department
means that all the purchase functions are
routed through one department
• Requirements of all other departments
for different kinds of materials are met
(purchased) by the department

14. Advantages of Centralized Purchasing Department
• Benefits of Large-scale purchases
• Can appoint specialized staff
• Better control on purchase is possible
• All records are kept in one central place. Thus, ready
information is available
• Can frame and implement uniform purchase policies
and procedures
• Avoids duplication of efforts in case of decentralized
purchasing
• Proper co-ordination and co-operation of different
department
• Also beneficial to the supplier/vendor since he has to
deal only with one department

15. Disadvantages of Centralized Purchasing
• May causes delay in getting material
• Branches situated at different places cannot take
advantage of localized purchasing
• Chances of misunderstanding between the
purchasing department and the department
which requires the materials
• Requires high initial cost to set a spate centralized
purchasing department

16. Functions of Purchase Department
Functions are to address and answer the
following questions
• What to purchase?
• When to purchase?
• Where to purchase?
• How much to purchase?
• At what price to purchase?
Purchase department has to answer and decide

17. Purchase Procedures
A. Receiving purchase requisitions
B. Exploring the sources of supply and choosing
the supplier
C. Preparation and execution of purchase
orders
D. Receiving and inspecting materials
E. Checking and passing of bills for payment

19. 1. Purchase Requisitions or Indenting For Materials
Initiates to purchase materials on the basis of
requisitions received form the concerned
department requiring materials
A form used as a formal request to the purchasing
dept to purchase materials
Prepared by the store keeper for regular stock of
materials and the departmental head for special
materials
Contains details regarding, quality, quantity and
other description of materials

20. 2. Exploring the sources of supply and choosing the
suppliers
• Answers “from whom to purchase materials?”
• Invite quotations by issuing tenders
• Open tender method - invites quotations from many
parties by giving advertisement in the press and is
followed when the purchase is in large quantities and
values
• Limited tender method - quotations are invited from
limited number of suppliers familiar and famous in
supplying materials
• Single tender quotation is invited from sole supplier
• On receipt of the quotations, the department prepares
a comparative statement of quotations for selecting the
supplier

21. 3. Purchase order
After selecting the supplier, the department issues a
purchase order
“a written authorization to the supplier to supply the
particular material or materials”
-an evidence of the contract, biding the supplier and the
buyer- supplier has to supply materials as per the
order, and the buyer has to pay the amount
mentioned therein, if conditions are fulfilled
4. Receiving and inspecting materials
Material inspection note – on completion of inspection,
the receiving clerk enter the details in Stores or Goods
Received Note
5. Checking and passing bills for payment

22. Material Abstract
An analytical statement prepared periodically on
the basis of the various material requisition
notes, returned notes and transfer notes.
• Shows the value of materials consumed in
each job at a glance.
• Shows the total amount of material to be
debited to each job and overheads.