PROJECT REPORT

ON
METHOD OF ISSUE OF MATERIAL

Submitted to: Dhenkanal higher secondary

school Dhenkanal
Submitted by: MAHABIR PRASAD MOHAPATRA

Roll no. IC-20-010

Regd no. DB08C20010

Under guidance of: MISS. SUMITRA BEHERA

Signature of External examiner Signature of Internal examiner

 DHENKANAL HIGHER SECONDARY SCHOOL
DEPARTMENT OF COMMERCE

CERTIFICTE

This is to certify that MAHABIR PRASAD MOHAPATRA, a student of class 12th has
successfully completed the project topic “METHOD OF ISSUE OF MATERIAL”
under the guidance of MISS. SUMITRA BEHERA during the year 2021-22 in partial
fulfilment of commerce

( COST ACCOUNTING ) project examination conducted by CHSE, Odisha.

SIGNATURE

MISS. SUMITRA BEHERA

 ABSTRACT:
This paper explores the relationships among cost accounting0
systems structure and information quality properties through an
integrated framework of cost system design and use. In our
framework, cost accounting systems structure is defined in terms of
the level of detailed information existence, the cost disaggregation
according to behaviour, the scope of variances calculation and the
frequency of cost information provision. Cost information quality
expresses its perceived usefulness by the users in terms of relevance,
accuracy, timeliness, usability, compatibility with their needs, up-to-
datedness, reliability, and thoroughness for decision-making
purposes. In order to investigate the existing relationships, data was
gathered from 119 leading Greek manufacturing companies via a
questionnaire survey. Our empirical findings indicate that the majority
of cost accounting systems structure characteristics exert a
statistically significant positive influence on cost information quality
dimensions. Only the systems’ ability to disaggregate costs according
to behaviour and their capability to generate customised to user
specifications reports were not found to be statistically significantly
associated with information quality. We believe that our conclusions
have important implications for researchers and professionals with
respect to cost systems design as well as cost systems evaluation.
The innovation of the study lies on the development of an integrated
framework that encompasses both cost systems structure
characteristics and cost information effectiveness features.
 Objective:
1) TO STUDY THE PRACTICAL APPROACH ON TECHNIQUE
OF MATERIAL CONTROL
2) TO STUDY THE VARIOUS TECHNIQUE FOLLOWED FOR ISSUE OF MATERIAL
AND ITS CONTROL.,
 CONTENT:

1 Introduction

2 Analysis &
Interpretation

3 Summery & Conclusion

4 References
 INTRODUCTION
Materials: -
The materials are a major part of the total cost of producing a product and are one
of the most important assets in majority of the business enterprises. Hence the total
cost of a product can be controlled and reduced by efficiently using materials.

The materials are of two types, namely:

(i) Direct materials:

The materials which can be easily identified and attributable to the individual units
being manufactured are known as direct materials. These materials also form part
of finished products. All costs which are incurred to obtain direct materials are
known as direct material costs.

(ii) Indirect materials:

Indirect materials, on the other hand, are those materials which are of small value
such as nuts, pins, screws, etc. and do not physically form part of the finished
product. Costs associated with indirect materials are known as indirect material
costs.
Issue of materials
Materials issued from stores are debited to the jobs or work orders which received
them and credited to the materials account. These jobs are debited with the value of
materials issued to them. But what is the value of materials?

Theoretically the value includes the invoice price less trade discount, the freight,
cartage, octroi and insurance on incoming materials, expenses of purchase,
receiving, storing and record keeping and carriage from the stores up to the process
plant However, in practice, it involves minute calculations for including all these
expenses and is a big task compared to the benefit derived from it.

Moreover the price changes according to the market conditions and at any given
time there will be stock of materials purchased at different times at different prices.
Hence the problem as to at what price the materials should be issued?

There are many methods of pricing material issues. The most important being:

1. FIFO,
2. LIFO,
3. simple and
4. weighed average methods.

Last in Last Out (LILO)

Under this method, issues are priced in the reverse order of purchase i.e., the
prices of the latest available consignment is taken. This method is suitable in
times of rising prices because material will be issued from the latest consignment
at a price which is closely related to the current price levels. Valuing material
issues at the price of the latest available consignment will help the management
in fixing the competitive selling prices of the products.

LIFO is the price paid for the material last taken into the stock from which the
material to be priced could have been drawn.” (CIMA). Under this method the
price of the latest consignment is used. In the example given above, 60 units will
be costed at Rs. 6 per unit or Rs.360 and 10 units will be costed at Rs. 5 per unit of
Rs. 50 or Rs.410 in all.

Advantages of LIFO METHOD

(a) The issue will be priced at the market rate prevailing, more or less, near the
date of issue. This has the advantage of ascertaining the cost at about the prevailing
market price and the cost thus ascertained will enable the prices to be fixed on
competitive basis.

(b) The principle of costing the goods at cost has not been given up.

(c) In case of rising prices the method has the advantage of showing a lower profit
which may help in saving tax to some extent. It is not without reason that this
method has come into use only when prices have been steadily rising.
Disadvantages:
The disadvantages of this method are the same as those of the FIFO method,
namely, excessive clerical labour and differing costs of similar jobs using similar
materials.

Other disadvantages are:

(i) Under this method the inventory is shown at the oldest market price and so does
not reflect the current conditions,

(ii) Since the inventory value at the end of a period is out of date, large adjustment
may be necessary, if the cost or market rule is applied.
 ANALYSIS AND INTERPRETATION

EXAMPLE-

A manufacturing company issues materials to jobs on the ‘last in first out’ (LIFO)
basis. At the end of each quarter all materials are valued at the cost of last delivery.

The company made the following purchase of a commodity X:

 CASE STUDY ON ULTRATECH

UltraTech Cement

UltraTech Cement Limited is an Indian cement company based in Mumbai. It is

a subsidiary of the Indian multinational conglomerate, Aditya Birla Group.
[4]
 Ultratech is the largest manufacturer of grey cement, ready mix concrete (RMC)
and white cement in India with an installed capacity of 116.75 million tonnes per
annum, and is the only company in the world to have a capacity of over 100
million tonnes in a single country, outside of China.
UltraTech Cement has 23 integrated plants, 1 clinkerisation plant, 26 grinding units
and 7 bulk terminals. Its operations span across India, UAE, Bahrain and Sri
Lanka.
In the white cement segment, UltraTech goes to market under the brand name of
Birla White. It has a white cement plant with a capacity of 0.68 MTPA and 2
WallCare putty plants with a combined capacity of 0.85 MTPA.
With 100+ Ready Mix Concrete (RMC) plants in 39 cities, UltraTech is the largest
manufacturer of concrete in India.
Problem
ULTRATECH company and is in business from 10 years. It has large
multinational and national banks as a customer. The following are the purchases
and issues during the month of March:
Opening
March 01 800 units @$7
Inventory
March 05 Purchases 1,000 units @ $ 6.55
March 09 Purchases 400 units @ $ 6.2
March 25 Purchases 1,400 units @ $ 6.05
March 12 Sales 1,200 units  
March 27 Sales 1,000 units  
 
Required:
Find out the value of Ending Inventory on March 31.
Find out the value of cost of goods sold under LIFO method using the perpetual
inventory method.
Solution
ULTRATECH
LIFO (Last in First out Method)
Date Purchases Sales Balance
March
            800 7 5,600
01
March 800 7 5,600
1,000 6.55 6,550      
05 1,000 6.55 6,550
800 7 5,600
March
400 6.2 2,480       1,000 6.55 6,550
09
400 6.2 2,480
March 400 6.2 2,480 800 7 5,600
     
12 800 6.55 5,240 200 6.55 1,310
800 7 5,600
March
1,400 6.05 8,470       200 6.55 1,310
25
1,400 6.05 8,470
800 7 5,600
March
      1,000 6.05 6,050 200 6.55 1,310
27
400 6.05 2,420
Total 2,800   35,000 1,100   13,770 1,400   9,330
 
Value of ending inventory of 1,400 units = $ 9,330
Cost of goods sold = $ 13,770
 Conclusion

Inventory is an essential part of a company; whether it is parts or equipment

everything must be accounted. There are many inventory methods available, but
the most popular methods are: FIFO or LIFO. The FIFO method is first-in, first-out
whereas LIFO is last-in, first out. Each method contains advantages and
disadvantages that affect inventory maintenance, affect net income, and financial
statements. It is up to management to decide which inventory methods is best
suited for their company
REFERENCE

https://maaw.info/StandardCostingArticles.htm

https://maaw.info/StandardCostingArticles.htm

https://maaw.info/StandardCostingArticles.htm

https://economictimes.indiatimes.com/definition/reference-price
Methodology:
Last in first out method used in material issue

Objective of study
1) TO STUDY THE THEORITICAL AND PRACTICAL BASED OF
ISSUING OF MATERIAL ON LIFO METHOD .
2) TO STUDY THE METHOD OF MATERIAL ISSUE OF ULTRATECH CEMENT
COMPANY .