materials requisitions

valentino46

Hi guys,

im attempting to fill in a stock record card for a task in one of my workbooks where there have been materials issued but one of the units issued is damaged. the materials requisition is advising me that the unit needs to be charged as a manufacturing overhead, so i suppose my question is do i include this in my stock record calculations (AVCO method used) and then when i come to fill in my job cards for direct materials and direct labour do i record this unit elsewhere as it is not or has not been used directly.?? hope that makes sense.

any help would be great ive checked sandys blogs and other q's in my workbook but could not find how to approach this damaged unit.

cheers

rob

SandyHood

If this happened in a factory where I was working. I would treat it as follows.
Issued from stock and received by production department X in the stock card (i.e. debit dept X (WIP) and credit stock)
Having arrived in dept X, the damage is noticed so it cannot be used. Debit dept X (production overhead account and credit dept X (WIP) )

As a narrative:
It left the stores in the belief that it was in good condition, so it has been added to direct materials in production dept X
Then after spotting it is broken
It is treated as an indirect material and debited to the prod ohd (and no longer direct so it is credited to the WIP)

Just in case WIP doesn't make sense
Work in progress (WIP) is the name of the account where costs are charged for the production of goods (I.e. where raw materials are converted to finished goods in a single production process company)

when i come to fill in my job cards for direct materials and direct labour do i record this unit elsewhere?

Yes it becomes production overhead

SandyHood

Sometimes a skills test will include a stock item that can be issued to one department as a direct material, and to another as an indirect material.

Off the top of my head I've an example (not the best example, but I hope it helps)
Packing tape: when issued to the packing department (direct material)
Packing tape: when issued to maintenance (indirect material)

valentino46

hi sandy, thanks for the point in the right direction, very useful yet again

cheers

rob