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Material Valuation Issue

Dear All,

I have one problem of Product costing.

Example

Finish Good

Material Z 100 Rs

BOM of Finish Good

Material X = 50 Rs

Material Y = 50 Rs

So when i do the Std costing of material Z system update the Std price as 100.

Now the problem is that we don't have a fix BOM component and quantity as for deriving the actual quality of material Z, user have to increase the quantity of material X & Y to any level and some time have to add material W to it as well, which is not mention in BOM and that to not in any fix quantity it may be 1, 2,3,4,...kg depend upon the requirement.

So because of this system create a huge variances in the system which client dont want and they say this amount should be added to the cost of material (not at the month at but at the time of confirmation)because material Z is in the BOM of next level of material (it is SEMI-FINISH) and maintian in the BOM of Material G. So that when we issue material Z for the production of Material G system should pick the actual cost which is actually incurred at the time of Production.

Currently what is happening

We issue

Material X = 70 Rs (Higher then what maintain in BOM)

Material Y = 105 Rs (Higher then what maintain in BOM)

Material W = 35 Rs (Additional Material)

So total consumption is 210 Rs

But when we received material Z the price is 100,

system create variance of 110 Rs . which client dont accept.

I have tried by changing the Price indicator of Material Z from S to V in that case system settle the variance to material by that was only at the month end. But what about the material consumed during the year , system will issue material Z at the price of 100 only to next level so the price of material at next level is wrong.(Material G).

Is there any solution for this type of scenario.

Regards,

Shayam

Former Member
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