CAS-6: Material Cost

• What goes into the cost of material received, and what stays out (§5.1)
• Normal and abnormal losses on the way in (§5.1.5–5.1.6)
• Valuing material issued: first-in-first-out and weighted average (§5.2)
• Direct and indirect material, and work done outside (§6)

Chapters

1. The cloth lorry has arrived · What goes into the cost of the cloth, and what stays out (§§5.1.1, 5.1.2, 5.1.8)
2. 80 metres torn on the way · When the good cloth carries the cost of the usual loss (§§5.1.5, 5.1.6)
3. Which roll leaves the store first? · Valuing cloth sent to the sewing floor: first-in-first-out and average (§§5.2.1, 5.2.2)
4. Cloth for this order, thread for everything · Which material belongs to the order, and which is shared (§§6.1, 6.2, 6.3)
5. Spot the mistakes in the cloth account · Use everything from this lesson (§§5.1, 5.2)

Key terms

• The cost of material received (§§5.1.1, 5.1.2, 5.1.8): The price you paid, plus the costs of bringing it in (freight, insurance, unloading), plus taxes you cannot get back, less discounts and taxes you can get back. Interest, waiting charges and fines are kept out.
• Normal loss before the material arrives (§§5.1.5, 5.1.6): A usual, expected loss on the way in (breakage, tearing, drying out) is absorbed by the good material that arrives, so each good unit costs a little more. A big accident that nobody expects is an abnormal loss and is kept out of material cost.
• Valuing material issued (§§5.2.1, 5.2.2): Material sent out for use is valued by a cost-flow rule such as first-in-first-out (oldest first) or weighted average (mixed price). Pick one that suits the business and keep using it.
• Direct and indirect material (§§6.1, 6.2, 6.3): Material that can be traced to the order is assigned to it directly. Material that cannot be traced, or is too small to be worth tracing, is shared out on a fair basis. Work done outside on your own material (like embroidery) is part of the material’s cost.