In the Cost Accounting module for IPCC(Material Capter), they have explained resons as to how Direct Material Costs can increase. I have a doubt in 2 of them:
*Interruption in the flow of materials and hence resuting in stoppage of machines.
*Over stocking of materials.
I understand how they both direcly affect the Total Cost of the firm. But i'm not understanding how they both increase the Direct Materials Cost. Please clarify :)
overstocking increases carrying cost of materials
interruption in flow of materials ie not purchasing in d right time increases purchase cost
1. As the overstocking of material increases the carrying cost which ultimately increses your material cost. AS-2 describes that you have to take all the cost incurred to bring the inventory to present location & condition in which carrying cost also included.
Gupta Sachdeva & Co. Chartered Accountants
New Delhi
CA Final
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