Direct Raw Material
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ScribdTranslationsDirect Raw Material
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ScribdTranslationsDIRECT RAW MATERIAL
The materials represent an important factor in the transformation process of
A good, they constitute the elements needed for production and are
consumers or transformed during the processes.
Manufacturing is the process by which raw materials are transformed into a
finished product. The materials are an essential cost element of
production. After purchasing materials and temporarily placed in
a warehouse, a manufacturer proceeds to transform them into a finished product
incurring conversion costs: direct labor and indirect costs
of manufacturing.
Direct raw material is defined as: In those costs that will be subjected to or
incorporated in a transformation process, in a physical or chemical change,
before they can be sold as finished products through the use of the
direct labor and manufacturing overhead costs in the process of
production.
Raw materials, when incorporated into the manufacturing process, are classified as:
Direct raw material and indirect raw material.
Direct raw materials are defined as all materials in their natural state.
the physical, which will be subject to a transformation process, which can
identify or quantify directly with finished products, examples:
Wood, fabric, steel, leather, mining companies and oil companies.
Indirect raw materials are defined as: They are the materials or supplies that are
subject to transformation, where they are not directly identified or quantified with the
finished product, examples: Paint, sandpaper, glue, varnish, nails, which is used
for the manufacture of furniture; buttons, brand tags, thread, is used for
the manufacturing of shirts; fastener, ribbons, dyes, soles, that is used for
the manufacture of footwear. Indirect raw materials are considered as part
integral of indirect manufacturing costs.
It is necessary for industrial companies to require the intervention of the
following departments:
oPurchasing Department: The person in charge is responsible for
supply of materials for negotiation with suppliers, for
acquire the best acquisition costs of the purchases made, because of their
Efficiency and quality of the raw material purchase will depend to some extent on the
manufacturing of the products, where they must be at any time
valued the cost of raw materials.
oWarehouse department: This department will be responsible for the storage and
storage of the raw material so that it is in good condition and can
locate it in any physical count of the inputs and outputs of the matter
good.
oAccounting department: This department will be in charge of the part of
control of raw material movements in the main records and
auxiliaries that allow the accounting entry of the executed transactions. The
stages of accounting control of raw materials are carried out through the
following accounts:
oRaw material inventory
o Work in progress inventory
oInventory of finished products
The main documents used for the control of raw materials
During the production cycle, they are the following:
o Purchase of raw material
oRaw material requisition
oPurchase order for raw material
oShipping note or dispatch
oRaw material receipt report
oReturn report to suppliers
oInventory control card (Kardex)
Production order (The cost sheet)
Purchase of raw materials: The warehouse manager formulates the purchase request.
to the respective department indicating the need to acquire the quantity of
raw material that the production department needs, with the authorization or
approval of the manager or person in charge of the production department, since the
The request is the responsibility of the warehouse or storeroom manager.
Raw material requisition: It is a document in which the materials are requested.
and supplies, which is sent to inform the purchasing department about
the needs that will be used in the production at the winery
corresponding, a purchase requisition is printed according to the
administrative policies that are developed in industrial companies, the format
include the following description: Requisition number, Department name,
requested amount, catalog number identification, description of the
material
according to their drafting policies.
Purchase order for raw materials: It is a document in which a
written order or request to a supplier for certain items at a price
agreed. The request also specifies the terms of payment and delivery. The
Order is the authorization for the supplier to deliver the items and present the
The invoice corresponding to the format of a purchase order is described as follows.
as follows: Printed name, supplier address, order number
purchase
required, terms of delivery and payment, quantity of requested items, number
from catalog, description of the material, unit price and total, shipping costs, of
management, insurance, total cost of the entire order, authorized signature, and others, according to your
drafting policies.
Delivery note or shipments: It is a document that only reveals the
detail of the shipment of raw materials, issued by a supplier to its clients,
Once the respective review is done, a credit voucher is then prepared.
fiscal or invoice.
Raw material receipt report: It is a document where the verification of the
articles that are sent to us or according to the received orders to have the
safety that they are not damaged and meet the specifications of the
purchase order from the packing list. The format of the receiving report is
describe a continuación: Nombre del proveedor, Número de orden de compra,
date the order is received
differences with the purchase order or mention of the damaged items, signatures
authorized and others, according to their drafting policies.
Return report to suppliers: It is a document where information is provided or given.
to know in detail the reason why the raw materials are returned,
specifying the quantities and the description in which they are returned.
Inventory control card (Kardex): It is a document where records are kept of the
inputs, outputs, and stocks of raw materials that directly or indirectly
they are used in the production process. Industrial companies can use
the inventory according to the following valuation methods applicable in the
medium
oAverage costs
oFirst In, First Out (FIFO)
oLast in, first out (LIFO)
Average cost: It is the average unit cost determined by dividing
the total amount accumulated of the applicable expenses, divided by the number of
inventory of acquired or produced items. Therefore, the outputs that are
After a new purchase of raw material, they are assessed at a new value.
average cost.
First in, first out (FIFO): They are the first purchases of
raw materials that entered the warehouse to be used in the
production department.
Last in, first out (LIFO): These are the last acquisitions of
raw materials that enter the warehouse are the first to exit, to be used in
the production department. The raw material should not be costed at a price
different from the last one, but until the most recent record has been exhausted.
When the physical handling of raw materials is developed, in some cases in
certain manufacturing companies do not match the total cost for each one
of the methods in the way they are evaluated.
Production order (The cost sheet): It is a document that details the
products requested by a customer, for which cost control is maintained
invested in the manufacturing of a good and, summarizing the value of the raw material
direct, direct labor and applied indirect manufacturing costs
for each processed work order. Each produced order has
a correlating purchase order number.
Accounting practice of direct raw material
Represents the controlling, valuing, processing, and informing part and
Evaluator of the company's movement, in particular of the materials in all
its phases. For their control, records or auxiliaries are required that allow
the timely seat of their movement.
The accounting control of the different stages that materials go through,
it is carried out through the following accounts:
oMaterials warehouse
oProduction in process; also known by other names such as Manufacturing
in process (only when the hand of man intervenes), cost of production, or,
simply, production.
oFinished products warehouse
o Warehouse of semi-finished or semi-processed products
The 'main helper' can be used through cards, loose sheets, or by
computer media, with the sum of the auxiliaries needing to equal that of the account
from the General Ledger.
In some companies, it is customary to use the Warehouse Assistant in duplicate.
of materials. In the warehouse department itself based solely on
units, and in accounting for units and values; the advantage of dual management is
that the relative auxiliary can be verified at any time
material, comparing the data from the warehouse manager with that of accounting, what
allows physical verification to be carried out more easily and orderly.
This way of working involves, of course, a double effort, but it is advisable.
due to the control it exerts, facilitating the timely localization of errors, which
represents a certain brake for subtractions and losses.
If you want to use the Work in Progress account as a liquidator, you do not
the Initial Inventory of production in Process would not be loaded, nor would it be credited for it
import of the Final Inventory of Work in Process, then this account
it will have a debit balance and will represent the value of production in process,
forming part of said balance of investments maturing in less than a year, in the line
from 'inventories', at the end of the period.
