SayPro The recording method of Raw Material Costs

There are two kinds of methods of recording the cost of raw materials used in production: a mutation method of inventory (perpetual inventory method) and the physical inventory method (physical inventory method). Mutations in the inventory method, each mutation is recorded in the raw material inventory card. In the physical inventory method, only the additional supplies of raw material purchases are recorded in inventory cards.Physical inventory method is suitable for use in determining the cost of raw materials in the cost of production companies are collected by the method of the cost of the process. Mutation method is suitable for use in a stock company that the cost of production is collected by the method of the cost of the order.Special identification methods (specific Identification Method).In this method, each type of raw material in storage must be marked on the base price of unity how raw materials are purchased. Every purchase of raw material prices different union at a price per unit of raw material prices that are already in the warehouse, storage must be separated and marked the price at the material purchased. Preformance of this method, each type of raw materials in the warehouse clearly the identity of basic price, so any use of raw materials to the base price per unit is known precisely.Method of Loading First, First Out (Firs-in, Firs-out method).Methods in first-out (MPKP method) to determine the cost of raw materials with the presumption that the cost per unit of raw material which first entered the warehouse, used to determine the price of raw materials was first used. It should be emphasized here that in order to determine the cost of raw materials, the cost flow assumption TIDA should match the physical flow of raw materials in production.Latest entry method, First Out (Last-in, Firs-out method).Last entry method, first out (MTKP method) to determine the cost of raw materials used in production with the assumption that the cost per unit of raw material supplies last entry in the warehouse, used to determine the cost of raw materials was first used in the production.Moving Average method (Moving Average Method).In this method, raw material inventory in the warehouse calculated the average cost by dividing total cost by the number of units. Every time a purchase is the cost per unit is different from the average cost of inventory in the warehouse, should be calculated the average cost per new unit. Raw materials are in use in the production process basic price calculated by multiplying the number of units of raw materials used by the average cost per unit price of raw materials in the warehouse. This method is also called primarily to the weighted average method, because in calculating the average cost of supply of raw materials, this method uses quantity weights of raw materials as numbers.Standard cost method.In this method the raw materials purchased are recorded in inventory cards for the standard price (stadart price) is the estimated price that reflects the price is expected to occur in the future. Standard price is the price expected for a particular fiscal year. At the time of use, raw materials charged to the product at the standard price.Method of Average Cost of Raw Materials at the End of the month.In this method, at each end of the calculation the average cost per unit of each type of raw material inventory in the warehouse. The average base price per unit is then used to calculate the cost of raw materials used in production within the next month.A raw materials inventory is the amount of raw materials that are in the possession of the owner during a specific accounting period. The assessment of this type of inventory may occur at the beginning of the period or at the end. Identifying the beginning and ending balance of the inventory during the period can help identify the amount of usage of raw materials that occurred during the period, and thus influence the process of ordering those materials for future periods.As with most types of inventories, the maintenance of a raw materials inventory is essential to the continued operation of any type of manufacturing operation. Ideally, the business will find the perfect balance between having enough materials on hand to maintain the most efficient rate of production, while also keeping the inventory as low as possible, thus reducing the amount of taxes that are assessed on the inventory. In order to accomplish this goal, monitoring the receipt and issuance of materials from that inventory is essential.In terms of maintaining the accounting records of a raw materials inventory, new shipments of materials received are noted as a debit in the records. When any of the raw materials are issued from the inventory, most often for use in the manufacturing process, this disbursal is noted as a credit, thus decreasing the total number of units and the general worth of the inventory. Many companies record these debits and credits to the raw materials inventory on a real-time basis, although it is still customary in some businesses to record the transactions on a daily or even a weekly basis.Structuring the ordering process helps to keep the raw materials inventory at a level where there is enough to support the continued operation of the plant, but not so much that a significant amount of the inventory remains untouched for extended periods of time. By monitoring how frequently materials are issued from the existing inventory, and comparing that with how long it takes for the supplier to process and deliver a new order of raw materials, it is possible to establish specific guidelines for placing orders in a timely manner. Continual monitoring of the inventory makes it possible to adjust the frequency and size of those orders so the inventory is kept within reasonable size, thus eliminating the need to pay additional taxes on an inflated inventory. While this process was once done manually, modern inventory software can easily be configured to track the activity within the inventory and automatically place orders when and as necessary.Please visit our website at www.saypro.online Email: info@saypro.online Email: info@saypro.online Call: + 27 11 071 1903 WhatsApp: + 27 84 313 7407. Comment below for any questions and feedback. For SayPro Courses, SayPro Jobs, SayPro Community Development, SayPro Products, SayPro Services, SayPro Consulting, and SayPro Advisory visit our website to www.saypro.online