Lectur-10 Main Ahmad Farhan (ACA) Material Lectur-10 Main Ahmad Farhan (ACA)

Charge Of Loss Normal Loss FOH cost Abnormal Loss Job Charge Charge

Loss Normal Loss : The Loss which was expected Abnormal Loss : The Loss which was not expected

Example A & Co manufactured 500 ceiling fans to fill an order by incurring : Direct material Rs. 150,000 Direct Labor Cost 100,000 F.O.H (60% of Labor cost) 60,000 Total Factory Cost 3,10,000

Solution Work in process 310,000 Material 150,000 Payroll 100,000 F.O.H applied 60,000

Rework Cost on Defective Work Material Rs. 1,000 Labor 3,000 F.O.H (60% of Labor cost) 1,800

Solution Normal Loss Abnormal Loss F.O.H Control 5800 Material 1000 Labor 3000 F.O.H 1800 Material 1000 Lab 3000 FOH 1800 Work in process 5800

Solution Normal Loss Abnormal Loss Finish goods 310,000 Work in process 310,000 Finish goods 368,000 Work in process 368,000

Per Unit Cost Cost of goods manufactured units manufactured Normal Loss Abnormal Loss 310,000 500 = 620 368,000 = 736

Example Spoiled inventory units 50 fans. Spoiled units Total cost = 310,000 x 50 =31000 500

Example Spoiled inventory units 50 fans (Alternative option) . Spoiled units Material 150,000 x 50 =15,000 500 Labor 100,000 x 50 = 10,000 FOH 60,000 x 50 = 6,000 31,000

Spoiled Goods Normal Loss Abnormal Loss Scrap Inventory 10,000 FOH Control 21,000 Work in process 31,000 Scrap Inventory 10,000 Work in process 10,000

Spoiled Goods Normal Loss Abnormal Loss Finish goods 279,000 Work in process 279,000 Finish goods 300,000 Work in process 300,000

Per Unit Cost in Spoiled Inventory Cost of goods manufactured units manufactured Per unit cost = Normal Loss Abnormal Loss 279,000 450 =620 300,000 = 667

Material Requisition It is a document through which work station incharge received material from store.

Documents Material Requisition Work station incharge Purchase Requisition Store incharge Purchase order Supplier

Important Documents

Purchase Requisition Description Material code Quantity Saba & Co Lawrence Road Lahore. PURCHASE REQUISTION No: 614 Date of Request------- Date Wanted----------- Request by department--------------- Description Material code Quantity Requested by ----------------------- Approved by ------------------------ COPY-1 PRCHASING DEP

Purchase Order STICH MASTER PURCHASE ORDER Township Lahore No. 2518 This number must appear on all packages and forms. Date----------------- To,---------------- Ship to: Date Wanted Ship Via FOB Terms Description Catalogue No Quantity

DEBIT NOTE Saba MASTERS Township Lahore. DEBIT NOTE No.------- Date------ TO-(Supplier)----------- We are debiting your account with the value of under mentioned material for the Reasons stated. Meanwhile we wait for your instruction. Quantity Description Rate Amount Reasons-------------------------------------------------- Date received Goods Received Note No

Store Ledger Card Qty Rate Amount Date Receipt /Consumption Issue /Sale Balance Qty Rate Amount

Bin Card Re order level__________ Maximum level __________ EOQ _________________ Minimum level __________ Danger level ____________ Date Ref Quantity Received Quantity issued Balance

Inventory Turnover Ratio Inventory Turnover ratio shows the stock position of the store room. In how many times inventory used. Inventory Turn over Ratio Cost of goods sold or Material consumed Average Inventory

Average Inventory Opening Inventory + Closing Inventory 2

Example Opening stock 1000 units Material Purchase 7000 units Closing Stock 500 units Material consumed Rs. 7500

Material consumed Solution Inventory Turn over Ratio Average Inventory 7500 (1000+500)/2 = = 10 time

Expression Of Inventory In Days No of days Inventory Turn over Ratio 360 = 36 days 10