Definition: The materials consumption report is a document used in the production process to summarize the goods used during a specific accounting period. In other words, the materials consumption report tracks how much raw materials and goods in process are used to produce products during a period like a week, month, quarter.
What Does Materials Consumption Report Mean?
Companies that have continuous production lines most often use this report rather than using a materials requisition form. Both forms essentially do the same thing. They record how much raw inventory was used in the production process, so that the storage manager can either order new stock or deliver existing stock to the production line.
The consumption report is also used to assign costs to the direct materials used in production. This is done by making a journal entry to transfer the cost of the raw materials used to the new cost of the goods in process.
You can think about it like this. When a factory receives a steel bar, it records the cost of that asset in the raw materials account. The steel bar is kept in storage until the production line needs it. Once a materials consumption report or materials requisition form is given to the storage manager, the steel is transferred to the assembly line. Depending on how much of the stock is used, the total cost or portion of total cost is allocated to the newly created goods in process.
A materials consumption report is then used to show how much raw materials actually made it into the product. This process happens over and over. Depending on the company, it could have several times an hour. Take the Pepsi Bottle Company for example. Their bottles are being created around the clock.