Production order status and Costing run

[former_member216878]

Dear Guru`s,

As per my knowledge if we wan`t to calculate variance on production order it`s status should be DLV/TECO. Now If I`m right then I have few scenarios`s..

1) What should be the status for the Order if it`s Planned for 100 and actual produced is 50.??

2) What should be the status of the Order if it was planned for 100 and actual confirmation 0.??

3) If for the month the order is planned for 100 and now the actual confirmation is 50 because it has to be made for 50 for 1 month and 50 in another.,??

4) Suppose the order is planned for 100 and actual produced is 50 then on what quantity variance will be calculated and on what WIP.??

Please guide me what should I do to calculate correct Variance on above 4 points....

Regards

Nitisha

[jose_reddy · Accepted solution]

Hi Nitisha....

Yes, it is right, in order to calculate variance, the status of the order should be either DLV or TECO in product cost by order scenario.

1) What should be the status for the Order if it`s Planned for 100 and actual produced is 50.??

     It is PDLV (partial delivery)

2) What should be the status of the Order if it was planned for 100 and actual confirmation 0.??

      It is REL (Release) if you released the order, if not it is CRTD (created) only.

3) If for the month the order is planned for 100 and now the actual confirmation is 50 because it has to be made for 50 for 1 month and 50 in another.,??

      Still it is PDLV (partial delivery) in the 1st month, once you receive remaining 50 output, the status will be      changed to DLV (Delivered) then you can calculate variance.

4) Suppose the order is planned for 100 and actual produced is 50 then on what quantity variance will be calculated and on what WIP.??    

     Variance will not be calculated as the order is still in PDLV, system only calculates WIP as you might use      ACTUAL COST as the valuation method in WIP settings

In your case in order to calculate variance for the quantity which is partially delivered, you should follow product cost by period scenario not product cost by order. If you follow product cost by period scenario, you can calculate variance for the partial delivered stock for that particular period.

But the selection of the right scenario (either product cost by order or period) depends totally on the kind of business the client is working on and their requirements.

(Or) If you want to go with product cost by order scenario and calculate variance with partial delivery, then you need to do TECO for the order at the month end and calculate variance, once month end process is over, you need to revoke TECO and do production activities related to the order. But keep in mind this is not a good practice as the total variance calculations might mislead to wrong analysis of order performance.

Regards...

Jose

[former_member216878 · Accepted solution]

Hi,

How will the process of doing TECO a production order for current month and then run costing run and then un TECO in next month will impact the costing???

What should be the status of an order if it is cancelled???

Regards

Nitisha

[jose_reddy · Accepted solution]

Hi Nitisha...

Please clarify what do you mean by costing run here (you want to consider it as month end process... especially for variance calculation)

I wanted to ask you this question early only as you mentioned same in the TITLE of the thread also, but you never spoke about costing run in the main query....... and now you are raising COSTING RUN again.....

Please provide some clarity....

Regards..

Jose

[former_member216878 · Accepted solution]

Hi,

I`m asking the above points in context with costing run(month-end process).. we have activated ML.

Regards

Nitisha

[jose_reddy · Accepted solution]

Hi Nitisha..

All right....

As you are expecting variance calculation before total delivery of output from the production order, I suggested to do TECO, so that system understands no further output is going to be received from production order and calculates variance as you expected. (but I already mentioned it is not a good practice)

When comes to the status change, once you do TECO, system shows TECO status over there and when you do revoke of TECO (cancel TECO), system removes the TECO status from the display.

If you want to understand the status of the order you need to check the STATUS CHANGES, from the menu bar select header and status changes...

There you would see TECO active, when you active TECO and TECO inactive, when you revoke TECO.

Regards...

Jose

[former_member216878 · Accepted solution]

Hi ,

Thanx`s for making picture much clear but how will system calculate the variance as below:

Suppose Planned Quantity is 100

1) for the month of Nov. only 60 is confirmed...I`l TECO the order and calculate the variance..Now on what quantity system will calculate the variance?I guess on 60,if it is so then what will happen to remaining 40 qty for the month of nov....

2) For Dec. month I have to change the order status from TECO to unTECO and suppose I confirm 40 qty in that month..(Total 60 already done +40 in dec) then I have to make the status of order as DLV..on how much quantity system will calculate variance in the month of Nov..100/40??

Regards

Nitisha

[rajneesh_saxena · Accepted solution]

Dear Nitisha

I am unable to understand why you don't want to see WIP on the orders. In Nov if you confirm 60 Qty the order is in PDLV status and you should calculate and post WIP on it. Then in the next month when you will do remaining 40 Qty, Order will come in DLV status and you will be able to calculate and post Variance on it and at the same time the WIP entry can be nullified.  That is the right thing you should do.

Regards

Rajneesh Saxena

[former_member216878 · Accepted solution]

Hi Rajneesh Sir,

My client dn`t want WIP.... that`s why I`m not considering it...Please tell me how do deal with the (above 60-40) thing...

Regards

Nitisha

[jose_reddy · Accepted solution]

Hi Nitisha....

Let me initially thank Rajneesh sir for the right guidance he has made and leading the thread when I was not there.

Nitisha please once again guide the client regarding the importance of WIP calculation and its legal requirement along with the standard behaviour in case of product cost by order (especially order status and its effects on variance calculations). If you have already guided him properly, then take a clear cut statement in writing from the client regarding WIP requirements as they don't want it.

Coming to the point, in your 60-40 case, in the first month you confirm 60 qty and do TECO, then there won't be any WIP, system calculates variance for the order balance (difference between order credit-GR value and total debit value) @ that point of time and posts variance entry when do settlement. The FI entry is as usual...

Dr/Cr production variance account

Cr/Dr COGM account

The CO entry and COPA entry depends on the mapping.

In the next month, you revoke TECO and confirm the order for remaining balance i.e. 40 qty. In this case since you receive total order quantity from production, system automatically generates status DLV (delivered) you don't need to do it manually like TECO. Since it is DLV, system won't calculate WIP, variance calculation is done for total order balance (considering 100 qty), but don't worry the variance entry will be posted for the remaining variance (by deducted already calculated variance in the last month from the total variance). The entry is as usual like above only.

Regards..

Jose

[rajneesh_saxena · Accepted solution]

Dear Jose

I think even revoking TECO is not required. As I have tested in my IDES that I was able to do GR even in the TECO state. And the results were that the same as you explained.

And Nitisha, Please test the scenario in quality and be happy.

One more thing to you (Jose) that you are taking very good strokes. All your shots are taking Sixes. Keep it up, its very good for the community that persons like you are contributing.

Regards

Rajneesh Saxena

[jose_reddy · Accepted solution]

Hi Rajneesh...

Yes sir, it is not required for GR, but if they want to confirm any further activities or issue material to the order (as she mentioned that in the next month they are going to confirm 40 qty), I suppose it is required. That's why I mentioned.

Please correct me if I am wrong....

Before I replied to her, even I checked the scenario in my system and felt the same. I hope we are working parallel.

Regards.

Jose

[Former Member]

Hi Nitisha,

First of get clarity on Planned Qty and Actual Qty of your production process.

Plan cost is generated at the time of creation of production order. Actual production starts with the issue of goods from MM side and activity confirmation from PP area.

Assume creating a production order with 100 qty, i.e., you total cost will be updated for 100 qty of finished/semi finished goods.

Later, when you actually starts the production, producing only 50 qty., i.e. you are decided to manufacture only 50 qty.

Here, try to understand the meaning of CRTD, REL, PDLV, DLV, and TECO.

1. CRTD and REL statuses will be updated at the time of creation of production order (based on settings for REL status).

2. PDLV status will be updated if you deliver 20 Qty out of total producing qty of 50.

In the above two cases, you ca calculate only WIP. That means, WIP can be calculated with the order status either REL or PDLV.

Also, remembers you can't calculate WIP and Variance simultaneously in product cost by order scenario.

Assume, the remaining 30 qty you have produced in the next month, order status will be updated with DLV. Later, you can do TECO before going for month end activities.

In the above process, first month you can calculate only WIP and not Variance.

Next month, when you deliver remaining 30 qty, status will be updated to DLV and can calculate variance.

When you do settlement in the second month, entries will be generated for WIP and Variance.

Here, WIP values will be reversed.

Hope you understand the total process.

BR, Srinivas Salpala

[rajneesh_saxena]

Dear Nitisha

Jose is very right, but I don't agree on the last point " do TECO and reverse in next month". This should not done in any case until unless you do not expect further delivery to this order. However he himself is mentioned that this is not a good practice.

Regards

Rajneesh Saxena