How to find material costs

Material costs constitute part of production costs, expenses for activities of production of goods and services, which includes: expenses are spent on raw materials, main and additional, auxiliary materials, energy, fuel.

Instruction

Material costs are determined using the following formula: the amount of material multiplied by the price of the material. In turn, the total change in the value of material costs can be calculated as the difference of the actual consumption of materials and standard material consumption.

When using the method of absolute differences can conduct a factor analysis of changes in material costs. Thus the deviation from the normative indicators for the use of some materials is defined in mapping are actually expended materials with standard costs of actual output. This deviation can be calculated by the following formula: (KF - KN) * CN where: CN — regulatory material prices; KF — value of the actual material consumption; KN — the amount of regulatory material consumption for its output.

In this case the possible reasons can be: replacement of any kind of quality raw material others (less quality), a violation of the standards for ordination of materials, direct expenditure, which is associated with violations of technology, irrational or improper to reveal, theft, damage.

Change the size of material costs within the influence of factor prices can be determined by the formula: CP x (TF - TSN) where: Cf — the value of the actual prices of the material; the TL size standard price of the material; KF is the value of the actual flow of the material.

In turn, the possible reasons for variances material costs are: the changes in market prices, the bad and the mismanagement of inventory that causes urgent purchases at the highest prices and the additional transportation costs and inadequate supply procurement service in finding the most favorable suppliers, as well as many other causes that may arise from procurement activities.

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