The document discusses various methods for material control and inventory management. It describes economic ordering quantity, just-in-time inventory, VED analysis, and ABC analysis as methods for material control. It then covers reorder levels, reorder quantities, formulas for calculating reorder levels, and methods for determining stock levels such as LIFO, FIFO, weighted average, and simple average. The goal of these methods is to minimize costs and optimize inventory levels.

1. UNIT 2
COST ACCOUNTING

2. MATERIAL CONTROL
• Material Control is a management function that is concerned
with the storage, handling, and use of materials to minimize
waste and improve inventory accuracy.
• This process can be beneficial for companies to reduce costs
and improve organization and productivity.

3. METHODS OF MATERIAL CONTROL
• l.Level setting
• II. Economic Ordering Quantity:
• III. Just-in-Time Inventory System:
• IV. Stock Control through ABC Analysis:
• V. VED Analysis:
• VI. Perpetual Inventory System:

4. ECONOMIC ORDERING QUANTITY
• Economic Order Quantity, also known as Financial Purchase
Quantity or Economic Buying Quantity, is the order quantity
that minimizes the total holding costs and ordering costs in
inventory management.
• EOQ= √2AB/CS

5. JUST IN TIME INVENTORY
• JIT is a form of inventory management that requires working
closely with suppliers so that raw materials arrive as
production is scheduled to begin, but no sooner.
• The goal is to have the minimum amount of inventory on hand
to meet demand

6. VED ANALYSIS
• VED analysis(Vital, Essential, Desirable) is an inventory
management system that segregates the stock based on its
functional importance for a business.
• It bifurcates the inventory into three parts, making it easier for
businesses to allocate their resources and budget accordingly.

7. ABC ANALYSIS
• ABC analysis (always better control)
•
• ABC Analysis classifies inventory items into three categories
based on their value and importance to the business: A (high-
value items), B (medium-value items), and C (low-value items).

8. PERPETUAL INVENTORY SYSTEM
• Perpetual inventory is a continuous accounting practice that
records inventory changes in real-time, without the need for
physical inventory, so the book inventory accurately shows the
real stock

9. REORDERING LEVEL
• Reorder level is the point at which businesses order new stock
from the supplier.
• REORDERING QUANTITY:-Reorder quantity is the number of
products you order from a supplier, where the reorder point is
the predetermined number of units you have left on hand .

10. FORMULAE FOR REORDERING LEVEL
• REORDER LEVEL:-Maximum consumption × Maximum reoder
period .
• MAXIMUM STOCK LEVEL:- Reoder level+ Reoder quantity -
(Minimum consumption × Minimum Reoder period)
• MINIMUM STOCK LEVEL:- Reoder level-(Normal consumption
× Normal Reoder period)

11. STOCK LEVEL
• AVERAGE STOCK LEVEL:- 1/2 (Minimum level+Maximum level)
• DANGER LEVEL:-Average consumption× Maximum reoder
period for emergency purchase

12. METHOS FOR ASCERTAINMENT OF STOCK
• LIFO METHOD
• FIFO METHOD
• HIFO METHOD
• WEIGHTED AVERAGE METHOD
• STANDARD PRICE METHOD
• SIMPLE AVERAGE METHOD

13. LIFO METHOD
• Under LIFO, the costs of the most recent products purchased
(or produced) are the first to be expensed. LIFO is used only in
the United States and is permitted under generally accepted
accounting principles

14. FIFO METHOD
• First In, First Out (FIFO) is an accounting method in which
assets purchased or acquired first are disposed of first. FIFO
assumes that the remaining inventory consists of items
purchased last.

15. WEIGHTED AVERAGE METHOD
• The weighted average cost method calculates the average cost
of your inventory, per unit. You can calculate WAC by dividing
your cost of goods sold (COGS) by the total number of units in
your inventory.

16. SIMPLE AVERAGE METHOD
• Simple average is an average of price without considering the
quantities involved. The average price is calculated by dividing
the total of the rates of the materials in the stores by the
number of rates of prices.