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raw material consumed (Accounts)

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This query is : Resolved



( Author )
23 May 2011

MY COMPANY IS CALCULATING RAW MATERIAL CONSUMED BY USING THE FOLLOWING FORMULA:
OPENING WIP XX
ADD: RAW MATERIAL ISSUED XX
LESS: CLOSING WIP XX


IS THE ABOVE FORMULA CORRECT???


CMA. CS. Sanjay Gupta

( Expert )
23 May 2011

No the above formula is not correct.

It should be---

Op. Stock of Raw Materials+Purchase of Raw Materials-Cl. Stock of Raw Materials.


faru faru

( Author )
23 May 2011

so how will i include WIP in the above formula??


CMA. CS. Sanjay Gupta

( Expert )
23 May 2011

WIP has no relation with raw material consumed. You will just have to consider Op Stock of Raw Materials, Purchase and Cl. Stock of raw materials. Once Raw Materials are issued whether the same has been converted in finished goods or WIP it is not a matter. Just apply this formula---

Raw Mat Consumed=Op. Stock of Raw Materials+Purchase of Raw Materials-Cl. Stock of Raw Materials.


faru faru

( Author )
23 May 2011

but sir this formula is being used in my company from a very very long time by an old ca.

further how can we ignore wip???


CMA. CS. Sanjay Gupta

( Expert )
23 May 2011

http://www.caclubindia.com/experts/finish-goods-raw-material-consupmtion-formula-363895.asp

Also see reply from above link.


faru faru

( Author )
24 May 2011

ok sir i have seen that but i want to know about the calculation of WIP


Pankaj Gandhi Jaiswal

( Expert )
05 June 2011

The formula given is incomplete please bifurcate WIP into Material in process & Expenses in process and then use you will get the result


faru faru

( Author )
05 June 2011

i didnt understand it pankaj


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