Meaning of Material Losses
Materials losses are bound to occur in every manufacturing industry. Material Losses may arise during handling. storage or process of manufacture.
Losses of materials losses arise due to evaporation, leakage breaking the bulk, careless handling poor quality of materials, obsolescence, inefficiency in operation, defective handling equipment, fire, accidents floods, theft, etc.
Type of Material Losses
Material losses can be classified into two broad. They are:
1. Normal Losses
Normal loss is that loss which is likely to arise normally or usually due to the inherent nature of the material. As it is due to the inherent nature of the material losses, it is unavoidable.
That is, it can not be completely eliminated. But it can be reduced to some extent, if there is proper material control. Liquid materials lost due to evaporation, liquid material lost due to leakage, coal tiles, bricks, etc.
Lost due to loading and unloading, materials lost due to breaking bulk, etc. are the examples of normal loss.
2. Abnormal Loss
Abnormal loss is that loss which is in excess of the normal loss and which arises due to abnormal causes, such as, defective planning, inefficiency in operation, theft, fire, flood, accident, careless handling, improper storage, etc.
Treatment of material losses
Control of Losses
Loss of materials can be completely eliminated. But, it can be controlled or reduced to some extent. For controlling or reducing material losses, the following measures may be taken.
1. Provision for proper storage facilities – By providing proper storage facilities, material losses arising from determination, fire, theft, etc. can be controlled to some extent.
2. Use of FIFO Method – By issuing materials to production on FIFO basis, material losses due to obsolescence can be controlled.
3. Systematic procedure for the movement of material – By laying down a systematic procedure for the movement of materials from one place to another, and prohibiting unauthorized movement of materials, material losses due to handling theft, etc. can be controlled.
4. Careful handling of materials – Through careful handling of materials, material losses during handling can be controlled .
5. Use of specialized material handling equipment’s – By using modern specialized material handling equipment’s, material losses during handling can be reduced.
6. Use of good quality materials – By returning the inferior quality materials to the suppliers and using only good quality materials, material losses can be controlled to a certain extent.
7. Setting up standard or limit for wastage – By setting up the standard for normal loss on the basis of quality of materials and manufacturing process, loss can be controlled.
8. Reporting – Through regular loss reports, which provide prompt and accurate information about the name of the department, cost center, report number, name of the material actual losses in terms of quality and percentage, normal loss, abnormal loss, causes for the loss and corrective measure suggested, loss can be controlled.
- Advantages and Disadvantages of Cost Accounting
- Difference between Cost Accounting and Management Accounting
- What is Cost Concepts and Different Terms of Costs
- What is concept of Cost Audit | Objective and Scope of Cost Audit
- Advantages and Disadvantages of Cost Audit
- Meaning of Methods of Cost | Basic Methods of Costing
- What is meaning of Classification of Cost & elements of Cost | rules of Cost Accounting Standard
- What is Installation of a Costing System | Conditions and Factors
- What are the practical difficulties in installing cost accounting
- What is technique of Costing | Various techniques of Costing
- What is Material or Inventory Control | Techniques of Materials Control
- What is FIFO Method | advantages and disadvantages
- What is LIFO method | Advantages and Disadvantages
- What is Periodical or Annual Inventory Control System | Limitations
- Methods of Pricing Material Issues | Cost Methods
- What is Cost of Labour Turnover | Causes, Effects Classification
- What is meant by idle time | Definition, Causes, Control
- What is meaning of overtime work | Reason, Disadvantages
- HIFO method of inventory valuation |Advantages, Disadvantages
- What is two Bin System | Meaning of Bin Card and Specimen
- What is Meaning of NIFO Method | Advantages, Disadvantages
- What is Market Price Method or Replacement Price Method | Advantages, Disadvantages
- What is average cost method of Inventory valuation | Advantages and Disadvantages
- What is Meaning of Weighted Average Price Method | Advantages and Disadvantages
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