Price differenc value in Actual cost of Production

[Former Member]

Hi,

We are creating a production order for Billets that is our Semifinished goods. The material master is maintained at Std price.

Lets say that Std prce of the Billet is 100.

Lets say that after the production order is completed , the actual cost of Billet is comes out to be 125.

Now this billet is used for the production of the finished goods Wires. For the production order of wires, the price of the billet is taken as 100.

In this way the actual cost of the Wire will not come.

May be this is the standrad process. Let me know in any way can we use price difference of 125-100= 25 in the production cost of wires so that I can get the actual cost of the wire.

We are not using Material Ledger.

Any suggestion

regards

[Former Member]

Closed

[Former Member]

I would agree with the option described by Ajay.

Btw Ajay, I read another post of yours regarding Cost of Sales as Cost Element. I believe a Cost Element is not required for Cost of Sales. Is there any document that supports this?

Regards,

Asim

[ajaycwa1981]

Hi

What you want is possble only with Material Ledger

W/o ML, you can use this workaround which will give you a better picture in the absence of ML

br, Ajay M

[Former Member]

Thanks Ajay,

Even using ML we cannot get the actual price before the end of the period. And at the month end only we can valuate the inventory withe actual cost. I hope I am right till now.

Pl correct if I am wrong.

But in this case some wires rods are already out from the inventory for the sale that was valuated with the Std Price of the Billet.

Hence these invenories will not be available at the month end for the revaluation.

Pl. correct If my thought is OK.

ML can only be used where ther is lots of Raw Matl price variation..Hence I think I should go with the std price valuation itself.

regards

Kamlesh

[ajaycwa1981]

Hi

Inventory available in stock gets revaluated...

For inventory sold off - You can revaluate COGS.. So, the cogs which was recorded @ Std price, gets revaluated now with actual price

Yes, all this happens at month end

br, Ajay M

[Former Member]

Hi Kamlesh,

The idea/concept of standard costing itself is that the price does not change during a period. And a revaluation of inventory is required and should be done only at a period end. Between the period where the billets are produced at Rs.100 are consumed at Rs.100 only and hence does not affects accounts. Regarding the cost of finished goods the same logic applies if the FG is consumed between a period. If you want to valuate the FG (in any costing system) it will happen at the period end only. My point is that if you want the inventory to have actual cost in between a period in a standard costing system, the requirement itself is not correct. Hope you understand the point.

Yes, you are 100% correct in saying ML will revaluate only ending inventory.

Best Regards

Vimal