Taneesha (Article) (36 Points)
01 May 2010In the Cost Accounting module for IPCC(Material Capter), they have explained resons as to how Direct Material Costs can increase. I have a doubt in 2 of them:
*Interruption in the flow of materials and hence resuting in stoppage of machines.
*Over stocking of materials.
I understand how they both direcly affect the Total Cost of the firm. But i'm not understanding how they both increase the Direct Materials Cost. Please clarify :)
siddharth chaturvedi
(NIL)
(102 Points)
Replied 01 August 2010
overstocking increases carrying cost of materials
interruption in flow of materials ie not purchasing in d right time increases purchase cost
Vineet Kumar Sharma
(Chartered Accountant)
(316 Points)
Replied 07 September 2010
1. As the overstocking of material increases the carrying cost which ultimately increses your material cost. AS-2 describes that you have to take all the cost incurred to bring the inventory to present location & condition in which carrying cost also included.
CAclubindia
