INVENTORY CONTROL (MATERIAL CONTROL)

Inventory control is the systematic control and regulation of purchase, storage and
usage of materials in such a way as to maintain an even flow of production and at
the same time avoiding excessive investment in materials. Efficient material
control reduces loses and wastages of materials that otherwise pass unnoticed.

OBJECTIVES OF INVENTORY CONTROL

Scientific control of materials should serve the following purposes:
(i) To provide continuous flow of required materials, parts and components for
efficient and uninterrupted flow of production.
(ii) To minimise investment in inventories keeping in view operatingrequirements.
(iii) To provide for efficient store of materials so that inventories are protected
from loss by fire and theft and handling time and cost are kept at a minimum.
(iv) To keep surplus and obsolete items to minimum.

There are numerous methods of pricing issues. They may be classified as follows:
I. Cost Price Methods II. Average Price Method III. Notional Price
Methods

Direct Labour Cost It refers to all labour expended in altering the construction,
composition, conformation, or condition of the product. The wages paid to skilled
and unskilled workers for his labour can be allocated specifically to the
particular product or the process as the case may be. In any manufacturing process
or department, the workers employed may be of the following two categories:
(i) Those who are directly engaged on the production or in the carrying out of an
operation or process;
(ii) Those who are assisting in the process by way of supervision, maintenance,
transportation of materials, etc.
The workers coming under the first category constitute direct labour and the wages
paid to them are called direct wages. In a factory, where production of several
products is undertaken or in a jobbing concern, workers are given job cards on
which they note the time devoted to each job or product. These job cards are then
analysed job wise so that the wages attributable to each job can be computed.
Direct labour cost is that portion of wages or salaries which can be identified
with and charged to a single costing unit. It can be easily identified with and
charged to a single costing unit as there is a direct relationship with the
product/process. Direct labour cost can be easily calculated and is quite
significant in amount.
Indirect Labour Costs
It refers to labour expended that does not alter the construction, conformation,
composition or condition of the product, but which contributes generally to such
work and to the completion of the product and its progressive movement and handling
up to the point of dispatch. In other words, labour employed for the purpose of
carrying out tasks incidental to goods produced or services provided is regarded as
indirect labour.

OVERTIME
Overtime refers to the situation when a worker works beyond his normal working
hours. The overtime rate is always higher than the normal rate and is usually
double the normal rate. The Factories Act and Shops and Establishments Act have
fixed the normal working hours, defined what constitutes overtime, the rate of
overtime and maximum hours of overtime.
Overtime consists of two elements viz. the normal cost and the extra payment or
premium. The premium is known as overtime cost. The normal cost is allocated to the
Production Order or cost centre/unit on which the worker is working. The treatment
of overtime cost varies according to the circumstances.

Causes of Overtime
Overtime arises due to the following circumstances:
(a) for working due to seasonal rush
(b) for making up time lost due to unavoidable reasons
(c) for completing a job or order within a specified period as requested by the
customer
(d) for working due to policy decisions, i.e. when there is general pressure of
work and labour shortage etc.
IDLE TIME
When workers are paid on time basis there is usually a difference between the time
for which the workers are paid, and the time actually spent by them in production.
The loss of time for which the employer pays but obtains no direct benefit is
termed as idle time. In other words, Idle time cost represents the wages paid for
the time lost, i.e., time during which the worker was idle.
LABOUR TURNOVER
It is a common feature in any concern that some employees leave the concern and
others join it. Workers change the job either for personal betterment or for better
working conditions or due to compulsion. Labour turnover is the ratio of the number
of persons leaving in a period to the average number employed. It is the change in
the composition of the labour force in an organisation. It can be measured by
relating the engagements and losses in the labour force to the total number
employed at the beginning of the period. All the losses must be taken into account
regardless of the cause for leaving.
Causes of labour turnover
The main causes of labour turnover in an organisation/industry can be broadly
classified under the following three heads:
a. Personal Causes
b. Unavoidable Causes, and
c. Avoidable Causes