Material Acquisition Costs

Posted in Operations and Supply Chain Terms, Total Reads: 495
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Definition: Material Acquisition Costs

Material Acquisition Costs include all costs associated with supplier sourcing, contract tendering, negotiations and finalisation, preparing and tracking the purchase orders from various suppliers, etc.


Additionally, it may also include the cost of transporting the raw materials from the supplier to the desired manufacturing facility or the warehouse.


In the case of Government contracts, there are two ways of charging the material costs. The first one is by direct identification of the material through a contract and the latter one is via inventory.


The purchase price of the material must be adjusted for extra charges incurred like material handling and shipping etc. Usually when a manufacturer buys some material in bulk from a supplier, he gets handsome discounts. These are called as Quantity Discounts.

 

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