Material Cost Management
Carroll said that manufacturing and selling costs are big elements in many of the companies he had worked.
But material costs are also important and in some companies they can be the dominant element. Variation in material costs are sometimes greater than all other costs combined.
Standard material costs can be set up and several desirable results will be achieved because of them.
1. It provides for consistency in costing.
2. Ease in inventory revaluation.
3. Variance analysis is possible
Variance analysis indicates when higher prices are paid.
As a part of material cost management, the amount spent as ordering costs, inventory carrying costs and shortage costs needs to be ascertained.