CAT MA1 Course Notes Contents Page
The procedures and documentation to ensure the correct authorisation, analysis and recording of direct and indirect material costs
Direct materials are those which can be specifically traced to a unit of production.
Indirect materials cannot be specifically traced to a unit of production. For example, paint being used in the construction of a product will be not be identified as going to a specific product.
Direct materials will be subject to formal requisition requests. Indirect material might simply be made available. For example, it is hardly likely to be cost-beneficial to account for individual screws or the use of drops of adhesive.
The costs of materials can be traced to production: the cost of direct material can be linked to specific items but the cost of indirect materials is likely to be allocated on an average basis.
The procedures and documentation needed to ensure the correct authorisation, coding, analysis and recording of direct and indirect labour and expenses.
Direct labour is labour that can be directly identified with a unit of production. A mechanic repairing a car would be an example of direct labour.
Indirect labour cannot be identified with specific units of production. For example a supervisor’s time is spread amongst all workers.
Labour time can be recorded using clock cards, time sheets, or by an assumption that everyone works a standard day. The clock card system is where the employee swipes a card through a reader when getting to work and again when leaving (“clocking-in and clocking-out”. The time working (or at least the time at work) can be calculated and wages calculated from that). The clocking-in and clocking-out processes should be supervised to ensure that employees do not clock in/out for friends.
Time sheets should be reviewed to ensure that time is recorded accurately against the jobs involved. For example, when an audit assistant spends time on a specific audit, an account code (or job code) will placed against that time on the time sheet. This code will enable the total time spent on each job by each employee to be accumulated.
Any overtime worked should be authorised by supervisors.
Employee wage rates should have been approved by the human resources department.
The procedures and documentation to ensure the correct analysis and recording of sales.
Sales transactions will normally be initiated by receiving an order from a customer. It is important that orders are recorded as soon as possible, for example by entering them in a register (book).
The customer’s account will be checked to ensure that the customer is paying for previous orders satisfactorily and will remain within any credit limit if the new order is approved.
As outlined above, from the order a multi-set delivery note or despatch notes will be raised so that the goods can be packed and despatched to customers. It is, of course vital that all despatched goods are invoiced otherwise the company will effectively be giving goods away. One way of doing this is to enter invoice numbers against the original register of orders. This should mean that all orders received have been despatched and invoiced.
In a manual system, the invoices will be listed in the sales day book. Sometime, the sales day book can have several columns for the sales of different categories of goods. The sum of these lists will be the total of sales made in each category.
any exercise or revision of CAT?