Question

what will be the issue of the non-verifiability of the percentage complete and other ending WIP details for the process which involves the outsourced function?

Answer 1

IT is merely ethical values of the job worker thet he should declare the actual percentage complete and other ending WIP details for the process. The manufacturer can not verify the percentage of completion of WIP. Only a ruff estimate can be made by the manufacturer to get idea of percent of complete of the WIP with the help of it's experties, knowledge and experience in the field. Manufacturer can project WIP inventory by standard INPUT OUTPUT ratio, and time consumed in manufacturing by a unit of stock. Manufacturer only have to believe on job worker and should obtain a declaration of percenteges of completion of WIP and record the same. Estimated period of completion is also to be mentioned by job worker in declaration in normal circumstances. In other words it quite easy for a job worker to manupulate the percentages of completion of WIP and other ending WIP details.

BUT from the point of view of job worker it is also difficult to curve out the gape obtained by false reporting of percentages of completion of WIP. IF Job Worker declare less percentages of completion of WIP than it will get a less number of fresh raw material because the supplier think that older process are not complete yet. and if a job worker declare more percentages of completion of WIP than he will get more work to do and it will create trouble for job worker of extra work force.