raw material consumed

This query is : Resolved

Quick Summary

Raw material consumed is generally calculated as Opening Stock plus Purchases minus Closing Stock of raw materials. Work-in-progress is treated separately, though material content within WIP may need bifurcation for accurate costing and inventory valuation.

faru faru

faru faru (Querist)
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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

CMA. CS. Sanjay Gupta (Expert)
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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.

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faru faru

faru faru (Querist)
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23 May 2011 so how will i include WIP in the above formula??

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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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

faru faru (Querist)
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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

CMA. CS. Sanjay Gupta (Expert)
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23 May 2011 https://www.caclubindia.com/experts/finish-goods-raw-material-consupmtion-formula-363895.asp

Also see reply from above link.

faru faru

faru faru (Querist)
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24 May 2011 ok sir i have seen that but i want to know about the calculation of WIP