MATERIAL:

ISSUE,CONTROL AND
VALUATION
 DEFINITION OF MATERIAL
CONTROL
ACC. TO B.K.BHAR:
MATERIAL CONTROL IS A SYSTEM
WHICH ENSURES THE PROVISION OF
REQUIRED QUALITY OF MATERIAL,IN
REQUIRED QUANTITY ON REQUIRED
PLACE AN TIME WITH MINIMUM
AMOUNT OF CAPILTAL.
 MEANING OF INVENTORY
• INVENTORY MEANS A SHEDULE OF
ITEMS HELD AT PARTICULAR POINT
OF TIME.

LEVELS OF MATERIAL CONTROL

QUALITY FINANCIAL
CONTROL CONTROL
 OBJECTIVES OF MATERIAL
CONTROL
 AVAILABILITY OF MATERIAL.
 MINIMUM INVESTMENTS IN MATERIAL.
 SUITABLE PRICE.
 TO AVOID SPOILAGE OF MATERIAL.
 PROPER ISSUE OF MATERIAL.
 ACCOUNTING OF MATERIAL.
 CHECKING OF MATERIAL.
 VALUATION OF STOCK.
 CONTROL ESSENTIALS OF
MATERIAL
• ESSENTIALS ARE

CENTRA- PERPETUAL
-LISED CLASSIFI- INVENTORY
-CATION SYSTEM
&
CODIFICA-
-TION
 MAIN TECHNIQUES OF
INVENTORY CONTROL
A) DETERMINATION OF STOCK LEVELS.
B) ECONOMIC OPRDER QUANTITY.
C) VED ANALYSIS.
D) MATERIAL TURNOVER RATIO.
E) ABC ANALYSIS.
F) PERPETUAL INVENTORY SYSTEM.
G) SIMPLIFICATION AND STANDARDISATION.
H) CLASSIFICATION AND CODIFICATION.
 A) DETERMAINATION OF
STOCK LEVELS

REORDERING LEVEL

AVERAGE STOCK Minimum stock level

LEVEL Stock
levels

MAXIMUM STOCK LEVEL

DANGER LEVEL
 A) BRIEFING OF ALL ABOVE
STOCK LEVELS
1) REORDERING LEVEL:
Reordering level: minimum level + consumption
during the time required to get fresh delivery

OR
• maximum consumption*maximum
reorder period
2) MINIMUM STOCK LEVEL:

Minim. Stock level = Reordering level +

(Avg. consumption* Avg. or Normal
delivery Time)
• 3) MAXIMUM STOCK LEVEL:

Maxi. Stock level = (Reorder level +

Reorder quantity) – (Minimum
consumption * Minimum reorder
period)
• 4) DANGER LEVEL:
Danger level = (Avg. ratio of
consumption*Maximum reorder period
for emergency purchases)
• 5) AVERAGE STOCK LEVEL:

Avg. stock level: ½ (Maximum stock

level + Minimum stock level)
OR
Minimum stock level + ½ (Reorder Qty)
 B) ECONOMIC ORDER
QUANTITY
• E.O.Q

ORDERING
CARRYING
COST
COST
 CONTINUED…
• E.O.Q = √2AB
S
Where, A = Annual consumption
B = Buying cost per order
S = Storage and carrying cost
per unit per annum.
 c) MATERIAL TURNOVER
RATIO:
• M.T.R = Cost of material consumed
during the period
Cost of average stock held
during the period

Average stock = op. stock + cl. Stock

2
 D) A.B.C Analysis of Material
Control:
• ABC STANDS FOR ALWAYS BETTER
CONTROL SYSTEM. IN THIS
TECHNIQUE BASICALLY IMPORTANT
MATERIAL IS CONTROLLED KEENLY
AND UNIMPORTANT MATERIAL IS LEFT
OUT.
 ADVANTAGES OF ABC
ANALYSIS:
• REDUCTION IN PURCHASE COST
• PROPER CONTROL
• BEST UTILISATION OF RESOURCES
• MINIMUM INVESTMENT
• REDUCTION IN CONTROL COST
 E) PERPETUAL INVENTORY
SYSTEM
IT IS A SYSTEM OF RECORDS
MAINTAINED BY THE CONTROLLING
DEPTT.,WHICH REFLECTS THE
PHYSICAL MOVEMENT OF STOCKS
AND THEIR CURRENT BALANCE.

IN THIS BINCARD AND STORES LEDGER

ARE MAINTAINED WHICH SHOW
GOODS RECEIVED,ISSUED.
 F) VED ANALYSIS:
• VED STANDS FOR VITAL,ESSENTIAL
AND DESIRABLE.VED ANALYSIS TO
HAVE CONTROL OF SPARE PARTS.IN
ABC ANALYSIS ONLY PRICES OF
MATERIALS ARE CONSIDERD AND
NOT THEIR REQUIREMENT.
 SIMPLIFICATION AND
STANDARDISATION:
• SIMPLIFICATION AND
STANDARDISATION ARE THE
IMPORTANT TECHNIQUES TO
CONTROL THE SIZE OF INVENTORY
SO THAT SIZE OF
INVENTORY,INVESTMENT AND COST
OF KEEPING THE MATERIALS CAN BE
REDUCED.
 CASSIFICATION AND
CODIFICATION:
CLASSIFICATION AND CODIFICATION
OF MATERILS ARE ESSENTIAL FOR A
GOOD SYSTEM OF STORE
KEEPING.CODIFICATION IS NEXT
STAGE OF CLASSIFICATION OF
STORES.
 PURCHASE OF MATERIAL:
• IN A BIG ORGANISATIONS,ALL PURCHASES
SHOULD BE PERFORMED BY A SEPARATE
PURCHASE DEPTT. USUALLY KNOWN AS
PURCHASE MANAGER.
• CENTRALISED PURCHASING ARE
PURCHASED BY ONE DEPTT.,IN OTHER
WORDS ALL PURCHASES SHOULD BE
PURCHASED BY PURCHASE DEPTT. TO
AVOID DUPLICATION OF EFFORTS.
 FUNCTIONS OF PURCHASE
DEPTT.
• WHAT TO PURCHASE?
• WHEN TO PURCHASE?
• HOW MUCH TO PURCHASE?
• FROM WHERE TO PURCHASE?
STEPS INVOLVED IN PURCHASE
PROCEDURE:
RECEIVE PURCHASE REQUISITION

EXPLORING THE SOURCES OF SUPPLY

AND SELECTION OF SUPPLIER.

PREPARATION & PLACING PURCHASE

ORDERS.

RECEIVING & INSPECTION OF MATERIALS.

 STORE OR MATERIAL OR
INVENTORY RECORDS:
• TWO IMPORTANT RECORDS OF
MATERIAL RECEIVED & ISSUED ARE
GENERALLY KEPT.

BINCARD STORES
LEDGER
 CONTINUED…
BINCARD: BIN MEANS A
PLACE,RACK,ALMIRAH OR THAT PLACE
WHERE MATERIALS ARE STORED.A
BINCARD IS USUALLY KEPT IN BIN.IT
PROVIDES QUANTITATIVE RECORD OF
RECIEPTS,ISSUES & BALANCES OF
STOCK.
IT IS MAINTAINED BY STORE KEEPER.
 CONTINUED…
STORES LEDGER: THIS LEDGER IS
KEPT IN COSTING DEPTT. THIS
LEDBER PROVIDES THE
INFORMATION FOR PRICING IF
MATERIALS ISSUED AND THE MONEY
VALUE AT ANY TIME OF EACH ITEM OF
STORES.
 STORES DEPTT.
• THE LOCATION OF STORES DEPTT.
SHOULD BE CAREFULLY PLANNED
AND IT SHOULD BE NEAR TO THE
RECEIVING DEPTT. IN ORDER TO
MAXIMISE THE TRANSPORTATION
COSTS.
 ISSUE OF MATERIALS:
• MATERIALS ARE RECEIVED AND KEPT
IN STORE CAREFULLY AND FINALLY
THE STORE KEPEER ISSUES THEM
WHENEVER THOSE ARE REQUIRED
FOR PRODUCTION DEPTT.,MATERIALS
SHOULD BE ISSUED AGAINST
PROPER AUTHORISATION ONLY.THE
OBJECTIVE OF MATERIAL ISSUE
CONTROL IS TO ENSURE PROPER
UTILISATION OF MATERIALS.
 MATERIAL ABSTRACT
• AN ANALYSIS OF VARIOUS MATERIAL
REQUISITIONS,MATERIAL RETURNED
NOTES AND MATERIAL TRANSFER
NOTES SHOULD BE MADE.A MATERIAL
ABSTRACT IS PREPARED
DAILY,WEEKLY,MONTHLY TO SHOW
NET MATERIAL CONSUMED IN EACH
JOB DURING THE PERIOD FORB
WHICH ABSTRACT IS PREPARED.
 PRICING OF MATERIALS
ISSUED.
• METHODS USED

MARKET PRICE
COST PRICE METHODS
METHODS
STANDARD PRICE
METHODS
CONCLUSION